Blue Ribbon in bid to end capital woes

working capital woes, raise production and recapitalise operations.
Herald Business understands that the company is considering several options, including selling equity.
Additional capital would result in an increase in capacity utilisation from about 30 percent to an average of 70 percent.

The funding raised would also be used to rehabilitate machinery and equipment, clear expensive debt, recapitalise the bakery unit and provide working capital.
Due to working capital constraints, BRI has over the last two years been operating intermittently with the firm’s production trends determined by cash cycles.
This means after a continuous production run the firm stops producing briefly to allow for cash accumulation, before resuming manufacturing operations.

During such brief periods, workers involved in production stay at home, but remain on full salary.
Only plant maintenance staff is working continuously. BRI’s head coun t – permanent and contract – stands at about 600 workers, across the country.
BRI chief executive Mr Mike Manga confirmed the capital-raising initiative, but would not reveal finer details on the capital-raising plan.

“Yes, there is a capital raising initiative that is in place,” said Mr Manga. He said he would not discuss the issue further for fear of jeopardise negotiations.
But he ruled out pursuing debt capital, saying such an option would burden the firm in an environment characterised by high interest rates and tight liquidity.
BRI requires an average of US$1 million a month to sustain its operations at optimal capacity and this requirement includes activities across the country.

The firm offers a range of products and services under the Blue Ribbon Foods brand, Nutresco Foods, the stock feeds unit, JA Mitchell’s and BRI Logistics.
Last year. the company accessed US$2,5 million from the PTA Bank and is reportedly seeking another US$2,5 million, after having pledged US$5million worth of assets.
Critical shortage of key inputs, such as wheat and maize, make BRI’s situation more difficult, as local producers cannot meet the industry’s requirements. The firm has to rely on imports from the region and beyond.

BRI is one of the biggest milling companies in Zimbabwe through its Harare and Bulawayo plants and is well-known for such brands as Ngwerewere and Chibataura
Its stock feeds unit is involved in the marketing and production of livestock feeds. The company produces a wide range of broiler, layers and pig feeds.
BRI, like many companies in Zimbabwe, faces a major challenge in accessing affordable financial resources to fund operations due to a tight liquidity situation.

The liquidity crisis is a result of limited production and export capacity of local producers, following a decade of economic instability. Banks have tightened lending conditions and charge punitive interest rates due to the high risk of default.

Limited capital inflows due to high-perceived country risk have not helped matters.
High cost of finance means the cost of products rises as well. This scenario makes local products less competitive than imports.
According to Industry and Commerce Minister Welshman Ncube local industry requires an estimated US$2 billion to retool and raise production capacity.