adminCairns announced last year that it wanted to raise US$20 million through a combination of rights issues and disposal of some non-core assets.
But this process cannot move forward before the RBZ’s Finance Trust of Zimbabwe disposes of its 63 percent shareholding in the food processor.
Other shareholders in the group include Cyrus Holding Corporation at 9,42 percent and Cairns Workers’ Trust, which holds a 4,2 percent stake.
FTZ is pulling out of Cairns as part of shareholders’ bid to raise hundreds of millions of dollars to clear debts to firms, banks and other institutions.
A capital raising initiative requires the backing of majority shareholders to pass and in this case new shareholder after FTZ will hold sway in the group.
“The speedy conclusion of the ongoing disinvestment of Finance Trust of Zimbabwe, a 100 percent owned subsidiary of the Reserve Bank, in the group to assist with implementation of the capital raising programme,” said Cairns.
Then chief executive Mr Philip Chigumira (now late) last year said a sum of US$5 million would go to working capital and the balance to new machinery.
To raise the requisite funds he said the group was considering a rights offer or selling the Mutare canning division and Bulawayo pasta operation.
Expectations were that disposal of the two operations would bring in US$4,2 million, as the group seeks a lot more funding to improve operations.
The two units have been making losses and Cairns expressed belief that streamlining the operations would instantly improve capacity and profitability.
Along with other import substitution groups Cairns has suffered under dollarised environment struggling to raise capacity to achieve better efficiencies.
The high cost of production, as has been the case with several other companies, presented challenges on the firm in dealing with external competition. Lack of working capital and aged equipment that frequently break down compounded the food producer’s operational and financial performance.
Last year, capacity utilisation at Cairns averaged 30 percent and frequent machine breakdowns compromised the company’s productivity.
Restructuring and closing down of production facilities has gone some way towards restoring profitability and the firm requires fresh capital to prop it up.
One thing that remains heavily in favour of Cairns is the group’s instantly recognisable brands such as Chompkins, Cashel Valley and Sun Jam.
While the firm continues to face capital-related challenges it managed to grow its revenue by 77 percent last year to US$19 million by August year-end. But the firm said volumes dropped by 30 percent due to liquidity shortages that have reportedly hampered the group’s operational capacity.
Although the group managed to reduce costs by 20 percent to US$4 million Cairns still recorded a US$8 million loss for the full year to August 30, 2011.
The firm said finance costs, at US$3 million, were only marginally lower than those for the prior year, as short- term interest rates remained high.
Online Reporter