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Massmart Holdings Limited - Announcement Regarding Makro Strubens Valley Fire
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1940/014066/06)
(Share code:MSM)
(ISIN: ZAE000029534)
("Massmart")
ANNOUNCEMENT REGARDING MAKRO STRUBENS VALLEY FIRE
On 13 May 2004, Makro Strubens Valley was totally destroyed by fire.
This announcement is being issued to update stakeholders on developments since
then.
The Cause of the Fire
At the time of the fire, an extension to Makro Strubens Valley was under
construction to extend the store"s trading space to improve customer service.
An independent forensic investigation has concluded that the fire was caused by
external contractors working on the project, cutting through the steel sheeting
on the roof of the store, with an angle-grinder. At approximately 13h35, sparks
from the angle-grinder ignited the roofing insulation above the liquor
department on the northern side of the building. As this fire occurred during
trading hours, it was established from eye-witness accounts and from in-store
surveillance cameras, that the fire spread rapidly along the roof insulation,
above the sprinkler system, moving from one end of the store to the other within
15 minutes. As parts of the insulation caught alight, it separated from the
fibreglass mat and pieces of burning insulation rained down on to the fixtures
and merchandise below.
The immediate and efficient evacuation of our customers and staff ensured that
no serious injuries occurred. The speed and effectiveness of the evacuation is
a result of the training and quick response of staff, a direct consequence of
Makro"s R20m investment in fire prevention, fire detection, and staff training
in fire safety, since the Woodmead fire in May 2001.
The sprinkler systems, as well as early warning alarms, were activated. The
sprinkler system, which is normally connected to the auxiliary water tanks
referred to below, was connected to the municipal water mains at the time of the
fire. This was because the store extension required the relocation of the
auxiliary water tanks and this work was in progress at the time. In terms of
agreed procedure, Makro"s insurance brokers were advised of the changed status
of the sprinkler system. The sprinkler system was ineffective in containing the
fire due to the speed at which it spread across the entire roof of the store
(above the sprinkler jets) and the fact that municipal water pressure was
insufficient in the circumstances.
Fire fighters and fire appliances from 22 fire stations assisted in fighting the
fire. The first units reached the premises within 20 minutes, by which time the
entire store was ablaze, generating flames 10m to 20m high. Despite their best
efforts, for which we thank them, they were unable to extinguish the fire and
devoted their efforts to containing it within the Makro premises.
During the course of the afternoon, Wastech, an environmental control company,
was called in to prevent and contain water and debris from flowing into nearby
catchment areas, and we thank them for protecting our environment.
The fire smouldered until the end of the following week when it was fully
extinguished. We apologise to residents in the proximity of Strubens Valley for
the smoke and pollution that resulted from the fire.
Within three days, all customers had been contacted directly and arrangements
were made, where possible, to facilitate their trading requirements with other
branches of the company.
Financial Consequences of the Fire
Makro is fully insured for the loss of the building, its contents and the
profitability of the store and following an extensive investigation by
independent loss adjusters, our insurers, AIG and Mutual & Federal, accepted
liability for the claim on 16 July 2004. In terms of the claim settlement,
estimated to be approximately R160m, Makro will be liable for additional excess,
which will not exceed R14.5m, but will be reduced by any recoveries from third
parties.
Makro"s insurance contract has been renewed by AIG for the year to June 2005.
The R9.6m increase in premiums, a portion of which is a consequence of the
Strubens Valley fire, will not have a material effect on the earnings of the
company.
Progress with the re-opening of Strubens Valley
Since the store"s destruction, all permanent members of management and staff
have been retained without any changes to their conditions of employment. Those
who are not involved in the re-establishment of the store have been redeployed
to other stores.
The site has been cleared and the contract for the reconstruction of the store
has been awarded to Murray & Roberts. Construction work has advanced to the
point where the roof is almost complete. The store is planned to re-open during
late October 2004.
Sponsor to Massmart:
Deutsche Securities (Proprietary) Limited
20 July 2004
Johannesburg
Date: 20/07/2004 05:49:06 PM Supplied by www.sharenet.co.za
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