PG Industries woes continue

difficult financial times and one of its shareholders BancABC has since revealed plans to dispose of its 15 percent stake in the company.
Last week, BancABC chief executive, Doug Munatsi, confirmed the intention to sell their interest in the associate company after directors published a loss warning statement.
They said full year earnings to December 31 are expected to show losses higher than previously expected.
PG’s woes continued after TA Holdings, which also has a substantial stake in PG issued a statement advising shareholders that the company was expecting to make significant losses, primarily driven by losses incurred by PG.
PG attributed the projected losses the the third quarter performance, which was lower than forecast, resulting from the timing of the impact of the capitalisation of operations.
During the period under review, PG also suffered from a breakdown in working capital cycle and increases in costs, which consequently impacted on margins.
As the company’s performance deteriorated, some critical skills were lost to competition and stocking levels dwindled particularly in the merchandising division.
During the financial year PG phased out Johnson & Fletcher brand acquired from Meikles a decade ago – another sign that the group is struggling.
PG is not the only listed company that is struggling, indications from published results show that many companies are still under capitalised.
Very few companies have managed to declare dividends since the adoption of the multi-currency system in 2009.
PG has become the weeping boy on the market after two of its shareholders raised concerns over their performance.
BancABC have already made their decision and it looks like TA is sticking with the building materials firm.
However – since management attributed the low earnings to the timing of the recapitalisation programme as the company managed to raise US$15 million, they can turn around the corner.
Some analysts have since indicated that BancABC could have delayed their exit until such a time when the recapitalisation exercise is expected to start bearing fruit.
PG is releasing its results today and the market is anxious on its performance.
Meanwhile, Lafarge Cement Zimbabwe, the country’s second largest producer, has disposed US$1,3 million equity investments to settle foreign creditors.
The latest strategy by the cement producer comes when companies are grappling with the high cost of money, resulting in firms failing to fully recapitalise businesses.
Company chairman, Mr Muchadeyi Masunda said in the company’s financial results for the year ended 31 December 2010 that the operating environment was characterised by tight liquidity, which adversely affected industry’s ability to recapitalise.
Lafarge, the only listed of the three cement manufacturing firms in Zimbabwe mobilised US$3 million offshore and US$2 million locally in the first six months of the year and only US$2 million was drawn by September last year.
For the 12 months to December 31 last year, Lafarge generated US$3,7 million from operations and US$3,8 million was utilised on capital expenditure.
Portfolios of equity investments are investments made by a company into other companies to utilise excess cash. The investment can be disposed to raise working capital.
ZSE listed firms made access cash during the hyperinflationary environment and they are now disposing the shares to fund raise working capital.
During the period under review, the company posted US$41,6 million in revenue, representing a 47 percent increase compared to US$28,3 million in the comparable period.
Lafarge’s export volumes were however 55,5 percent lower than 2009.
Depressed exports were attributed to constraints arising from the refurbishment of the Tete Bridge in Mozambique, which links Zimbabwe and Malawi.
Operating margins improved 6,2 percent in 2009 to 10 percent, as expenditure was focused on plant rehabilitation and improving efficiencies.
During the period, profit attributed to shareholders remained at US$2,7 million despite increased sales revenue, due to a tax expense incurred for the year as opposed to a tax credit in 2009.
Basic earnings per share for the group also remained unchanged at US0, 3c per share.
In the outlook period, Mr Masunda said the country’s economy is expected to continue to grow with increased activity in mining, construction and infrastructural development further improving domestic demand for cement remaining strong.
“The local company is ambitious to improve annual capacity from 500 000 tonnes to 1 million tonnes in the next five years,” said Mr Masunda.
Lafarge has an installed capacity of 0f 750 000 tonnes per annum and controls an estimated 55 percent market share.
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