adminfollowing years of poor performance.
The group shut down the business in a bid to stop further negative impact on the rest of the group and its closure is expected to improve company profitability.
Group chairman Dr Charles Utete said the division had incurred losses for a number of years and the group found it prudent to stop any more negative impact on the rest of the group by this division.
“Since the introduction of the multiple-currency trading system, Astra Steel had been reporting trading losses every month, to the detriment of the group.
“It has to be noted that the steel division, even during prior periods when it reported trading profits, was never a significant contributor to the group’s profitability,” he said.
Astra Steel’s core product was reinforcing steel.
In a statement to shareholders for the year ended August 31, 2011, Dr Utete said major shareholders, Finance Trust of Zimbabwe, a 100 percent subsidiary of the Reserve Bank of Zimbabwe, was in the process of offloading its stake in the group.
Finance Trust controls 63,9 percent of the issued shares in Astra. It is understood the RBZ would want to use the proceeds to retire its debt. Barloworld, through Cyrus, is the second largest shareholder, and Equivest has been aggressively building a stake.
For the year, Astra turned over US$23,7 million and managed a profit for the year of US$930 069 from continuing operations while a loss of US$509 611 was incurred from discontinued operations.
The group had forecast a 30 percent increase in turnover to US$26 million in the year to August 2011, with a gross margin between 32 and 35 percent.
The group said operations aggregate volumes increased by 23 percent. But pressure on margins resulted in a lower increase in sales of 21 percent over last year.
The paints business recorded a 16 percent increase compared with the previous year. The division also suffered from strong competition from both local producers and imports. Chemicals division also registered an increase in volumes, going up 27 percent. The division comprises of Astra Chemicals, Chemicals Enterprises and NCP Distillers Zimbabwe.
Despite the good growth in volumes, the division achieved a small profit due to the combined effect of reduced margins, high operating costs and low demand for potable ethanol.
Astra had four major business lines – paint, steel, chemicals and alcohol – through its 51 percent joint venture with Hippo Valley.
Its paint business is the largest paint and protective-coating manufacturer in the country with about half of the market share. The business is buoyed by its technical partnership with Freeworld Coatings, the largest paint manufacturer in Africa.
Online Reporter