Africa-Israel Investments Ltd. (TASE:AFIL), controlled by Lev Leviev, lost NIS 179 million in the second quarter of 2015, which compares with a small profit of NIS 8 million in the first quarter, and a loss of 65 million in the second quarter of 2014. The loss in the current quarter is mainly due to losses on revaluation of real estate assets.
Africa-Israel's shareholders' equity shrank by even more than its loss, NIS 364 million, because of provisions the company was obliged to make against a fall in the shekel value of assets held overseas, chiefly in Russia. Shareholders' equity was NIS 2.54 billion at the end of the second quarter, compared with NIS 2.9 million at the end of the first.
Africa-Israel says that it made a net write-down of NIS 224 million of the value of buildings and land that it owns, and NIS 457 million of the value of its holding in Africa-Israel Industries.
Revaluation losses on assets in Russia amounted to NIS 241 million, partly because of the weakness of the ruble against the dollar. On the other hand, assets in Romania were revalued upwards by NIS 12 million.
Africa-Israel Industries, which mainly produces and sells metal and ceramic products for the construction industry, lost a further NIS 23 million in the second quarter, and continues to weigh on the parent company. The parent company's financial statements say that Africa-Israel Industries is still not in conformity with its financial covenants with its creditors, and that it is considering selling off assets in order to meet its commitments. To that end, the management of the subsidiary is examining the sale of land in Russia and Israel, or the sale of dormant shares that it holds (9.5% of the company), worth NIS 32 million at the end of June.
Africa-Israel Investments has a net solo debt of NIS 2.67 billion. In order to repay debts of NIS 1.1 billion in the next two years (by the end of June 2107), the company's management, headed by Avraham Novogrocki, plans to sell land to the tune of NIS 101 million over the next two years and shares in subsidiary companies (probably Africa-Israel Properties and Africa-Israel Residences) to the tune of NIS 452 million. In addition, the company plans to draw dividends and take loans from group companies to the tune of NIS 591 million.
Under this plan, Africa Israel Investments will have about NIS 155 million cash at the end of June 2017, and it is due to repay NIS 714 million of debt by the end of June 2018. This gap has been very worrying for stock market investors, who are trading the company's long-term debt at about half its par value at an annual yield to redemption of 25%.Africa-Israel's market cap is currently NIS 532 million, about 20% of the level of its reported shareholders' equity.
Published by Globes [online], Israel business news - www.globes-online.com - on August 27, 2015
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