As Foscor Zirconia losses mount, CUMI may sell stake in S Africa subsidiary

Company News

Caborundum Universal Ltd (CUMI) is looking at options, including selling its stake in Foscor Zirconia, a subsidiary in South Africa, as the business has not turned around over a period of time. The profit before interest and tax for the quarter ended June 30, 2019, was adversely impacted, amounting to about Rs 6 crore due to losses in this subsidiary.
The company has two options -- one, to shift the factory to a location where it can produce at a lower cost and another, to sell if off to a buyer and move out. The company said that it is likely that it would move towards the second option because there is a pressure locally to keep the jobs in South Africa, said senior management officials in a recent earnings call.
The plant produces monoclinic and calcia stabilised zirconia with fumed silica as a by-product, which could be used in various applications, including ceramic colours, abrasives, chemicals and refractory products for the glass and steel industries.
The plant produces between 2,800 to 3,000 tonnes of three grades of Zirconia, all of which is sold in Europe, India and the US. While the product is good, the company is still losing money.

"If you make more, we can still sell more, so the options with us was one, whether to relocate the plant and take it out and put it in a more, let us say, lower cost, manageable location and scale up. The other option was to find a buyer to whom we sell and move out. Today, it is moving towards the second option because there is a pressure locally to keep the jobs in South Africa, so that is the direction it is going," K Srinivasan, managing director, Carborundum Universal Ltd, told analysts in a recent earnings call."Any transaction would also facilitate our continuing to be engaged in either getting our requirement for India or for any other market that we address, so that will be part...Read More