London 02/02/2016 - GKE Metal has sold its stake in its non-ferrous metals logistics and warehousing joint venture with Louis Dreyfus as poor market conditions weigh.
The Singapore-based company has signed a legally-biding memorandum of understanding (MoU) with Hung Lin Holding Ltd to sell its 49 percent stake for 4.2 million Singapore dollars ($2.94 million).
GKE has three LME-listed warehouses in Singapore and also has operations in Shanghai.
The proposed sale would result in a net gain of approximately 1.7 million Singapore dollars over the net tangible assets but a net loss of approximately 3.4 million over the net book value.
“This potential net loss mainly stems from the impairment of assets as the commodities market deteriorated over the past year, which will be a non-cash charge to the group,” GKE CEO Neo Cheow Hui said.
The company added that the future of the metals sector continued to look bleak, and attributed the downturn to current global economic uncertainties and the slowdown in China’s economic growth.
“Based on the current market conditions where the oil price has fallen to new lows, it is likely that metal prices will continue to trend lower,” it said.
Amid this “challenging business environment” and operation costs, Hui said that he company is using this opportunity to free up resources to better focus on expanding its strategic business opportunities.
The proposed sale is conditional - clauses include the approval of LD Commodities Metal Asia Pte Ltd, a subsidiary of Louis Dreyfus Commodities BV, which had acquired a 51 percent stake in GKE for eight million Singapore dollars in 2012.
(Editing by Martin Hayes)