A company which operates more than a dozen recycling facilities across the country has now been placed in administration after suffering financial difficulties and an industry downturn.
The scrap metal recycling industry has been challenged over the past few years due to the decline in manufacturing, a consumer base which isn’t buying as much and the subsequent decline in recyclable materials.
The business has also suffered due to the fluctuation of prices for scrap metals, which have been affected by the European financial crisis.
CMA Corporation was placed in voluntary administration on Friday, August 2. PPV Advisory appointed administrators Phil Carter, Marcus Ayres and Nicholas Martin, saying in a statement the firm would undertake an “urgent review”.
Ayres told SmartCompany this morning while an investigation is ongoing, it’s clear industry pressure has been a factor in the company’s demise.
“The recycling business in general has been under a fair bit of pressure, and no doubt that’s been a big cause of the current issues the group is facing at this stage,” he says.
According to a recent report from IBISWorld, the scrap metal recycling industry has faced a “tumultuous” past five years, with revenue contracting at an annualised rate of 2.6% during that period.
“Upstream activities in the industry have been adversely affected by poor demand conditions,” it says.
CMA said it has been undergoing a restructure of the past year, including talks with lenders. It said last week it was unable to make an interest payment worth $2 million. Currently, the business only has a market capitalisation of $1.4 million, while a report from earlier this year pinned the company’s debt at over $120 million.
According to the company’s half-yearly report published in February, it reported a loss of $52 million for the six months to December 31 – up from a loss of $18.24 million in the previous year.
At the time, managing director John Pedersen said the company was in the midst of lowering operating costs, and would focus on “core assets”.
CMA employs 250 staff across 20 different locations across the country, along with New Zealand, Asia and the United States.
The recycling industry has been especially vulnerable to the manufacturing sector, but also consumer confidence. As the IBISWorld report points out, fewer purchases results in lower demand for manufacturing.
“As a result, demand for manufacturing industries has gone down, lowering the supply of scrap metal generated from manufacturing activities.
“A low consumption level has also meant a low waste volume, leading to a low supply of scrap metals.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
