sinking fast now, page-13

Brenid,
I agree with you that the company faced a very bleak future but your view if its current circumstances very optimistic. Its situation is now even worse.

PSH is about $100m in debt to banks plus about $7m it is borrowing to close down Soda Ash production. It has an unresolved issue of a Take or Pay contract with Ridley for salt which it can no longer use. It has the environmental liability of the Osborne site.

Making bi carb from imported Soda Ash requires a source of CO2. This is proposed to be done by making lime from limestone which releases the gas. You may say that the lime will be a free by product but then the cost of the CO2 has to be ascribed to Bi Carb production. This will be a very expensive operation to run in Port Adelaide without an economy of scale.

The old and complex kilns will have to be run and maintained by the remnant staff.

The new sales operation has no competitive advantage over other importers of this commodity. There is no brand loyalty or product differentiation. The buyers are all sophisticated large industrial companies who will easily switch supplier. I doubt there would be $8-9 m of profit available for long before a competitor would import for a lower margin.

The interest on about $107m a year at say 8% is $8.5m. If there were to be a profit after that, which I doubt, it may take 50 years to pay the debt off before shareholders get a dividend.

PSH is just about finished. I have predicted its demise and sliding shareprice with accuracy for years.

If I were a shareholder I would be selling for whatever I could get.

Bacci