Companies struggle to make profit

and it is evident that most companies are still struggling to come back to profitability.
Companies have started to employ different strategies to remain afloat in this cash-starved economy – it seems the strategies that are being adopted are just reducing the size of companies!
During the hyperinflationary period, Zimbabwean companies went on an expansion drive characterised by massive diversification resulting in companies operating businesses outside their core functions.
Now we are witnessing firms disposing of their non-core and non-performing companies to remain with the cash cows. However, the businesses, which are being considered non-core and non-performing were the star performers during the hyperinflationary period.
The market is going to experience a number of corporate deals as companies try to realign their businesses.
However, it is going to be very difficult for these companies to find buyers for their non-core and non-performing businesses and they run the risk of selling them at a discounted price, just to let them go.
Recently, starafricacorporation announced that they would be disposing of West Bev, Red Star, Marathon Tyres and Arthur Gardens Engineering for US$22 million.
The disposal of Redstar is expected to be complete before the end of the second half of their financial year.
The disposal of these four entities will leave starafrica with its core business of sugar refining, packaging and logistics.
The group’s key businesses include Gold Star Sugars and Country Choice Foods.
Aico Africa Limited also said it is expecting to realise about US$8 million from the disposal of its two subsidiaries.
The group is in the process of offloading its 75 percent shareholding in Scottco and the entire shareholding in loss making frozen vegetable arm, Exhort.
Aico, will then be concentrating on its core business of cotton, seed and fast moving consumer goods under Olivine Industries, which is also expected to benefit from the funding.
The group is also in the process of disposing Salamax Trading, which was described as a burden to the group.
Hotel group Rainbow Tourism Group this week said they are disposing assets that are not related to their core business.
Group subsidiaries approved by the board for disposal include Touch the Wild, Hathanay Investments and Zimbabwe Mauritius Tours and Travel trading as Tourism Services Zimbabwe.
Tenders have already been invited from interested bidders for the purchase of the assets.
RTG, the country’s second largest hospitality chain, operates Rainbow Towers Hotel and Harare International Conference Centre and A’Zambezi River Lodge in Victoria Falls.
Another tourism group, African Sun Limited, also made a decision not to renew its operating agreements with both The Grace Hotel and The Lakes Hotel.
The group said it would not continue to hold leases of underperforming hotels after their landlord Dawn Properties announced that they would offer leases to other hotel operators.
Chief executive Dr Shingi Munyeza said their target would be to acquire management contracts in the South African market, particularly in business hotels.
He said emphasis on mega cities as highlighted in their business strategy with focus on RevPar growth and rooms growth would remain pivotal.
Dr Munyeza said the major reason for pulling out of South Africa was due to the reduction in overseas visitors and domestic travellers coupled with the continued pressure of the global recession and rapid escalating running costs in South Africa made the business unsustainable.
Going forward, the hotel group will be adding 231 rooms to its portfolio by December 2011.
These will be through the addition of another Holiday Inn with 153 rooms in Gaborone and a management contract under the Best Western brand in Benin City, Nigeria, comprising 80 rooms.
New signings for the group include a three-star, 201 roomed business hotel, Amber Express in Accra, Ghana, scheduled for completion within the next 24 months.
African Sun also said it would continue to pursue opportunities in East and West Africa.
Other corporate deals
Kingdom Financial Holdings is looking for joint venture partners to raise about US$7,5 million through a private placement.
Interfin Financial Services is set to takeover the entire shareholding of its commercial banking subsidiary, Interfin Banking Corporation through a share swap deal.
The directors of the financial services firm are seeking shareholder permission at its Annual General Meeting scheduled at the end of this month to acquire 59,68 percent shareholding in IBC.
Interfin FS currently holds 40 percent in the banking arm.
Company secretary Tsitsi Muchengwa said directors are seeking to purchase 7 533 333 ordinary shares of IBC, from the members in exchange for 30 547 665 ordinary shares in Interfin FS on the basis of 4 055 Interfin FS shares for every 1 000 IBC shares.
This means that shareholders in IBC relinquish their stake in the banking arm and assume more shares in the holding company, as IBC shares would be listed on the Zimbabwe Stock Exchange.
Resources group RioZim Limited is negotiating with a potential financier to underwrite its proposed rights offer that has been reduced from US$40 million.