Coromandel Fertilisers, which has an option to buy a 16.5 percent stake in phosphoric acid producer Foskor, is relocating six staff members from its head office in India to Richards Bay to implement a business assistance agreement.
Alfred Pitse, Foskor's chief executive, said yesterday that "the business assistance agreement, which becomes effective from April 1, will result in Coromandel seconding six expatriates to work on the Richards Bay plant for the next three years".
The agreement is focused on increasing production, improving logistics and procurement, and reducing costs.
Foskor has been struggling in the face of the strong rand, with more than 90 percent of its revenue being dollar based. Compounding the effects of the strong rand has been a sharp rise in the price of sulphuric acid, which Foskor imports.
Measures to address these factors have included selling non-core operations and retrenching 245 staff members.
Pitse said the business assistance agreement with Coromandel was "precisely aimed at avoiding retrenchments".
In the year to June, Foskor reported a loss of R198.3 million from a previous loss of R3.3 million. The Industrial Development Corporation (IDC) bailed Foskor out by increasing a loan to R544.2 million from R99.5 million.
Pitse said Foskor was expected to break even next year at R6.30 to the dollar, and with Coromandel's contribution, it could break even below that.
"Coromandel is confident it will be able to help us increase production and improve efficiencies," he said.
Fees payable to Coromandel in terms of the business assistance agreement will be based on Foskor's earnings before interest, tax, depreciation and amortisation (Ebitda) at the end of the three years compared with Foskor's Ebitda at the beginning of 2005.
The IDC, Foskor's parent, plans to substantially reduce its stake in Foskor by bringing on board a black economic empowerment partner and listing it on the JSE Securities Exchange.
The Coromandel deal, which was announced in February, gives it an option to buy a 16.5 percent stake in Foskor, but Coromandel will only consider exercising the option in three years' time once the assistance plan ends.