PG Industries Zimbabwe plans to dispose of its major properties and shareholding in Manica Boards and Doors (MBD) in a bid to cushion against high finance charges.
Report by Kudzai Chimhangwa
The charges emanate from excessive borrowings.
Shareholders approved at a recently held extraordinary general meeting for the disposal of the company’s assets as the interest cost on the short-term loans, ranging between 18% and 22%, continues to be a burden.
In the first quarter of this year, PG managed to dispose of 18,9% of its remaining 27,9% shareholding in MBD for US$2,4million.
The group says the remaining 9% continues to be available for sale.
Negotiations with the current MBD shareholders to sell the shares to them are in progress. The objective of this exercise is to raise cash, so as to fund remaining operations and reduce bank borrowings.
Shareholders also approved the disposal of excess to required properties, with proceeds from the transaction also being channelled towards reducing bank borrowings.
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Following shareholder approval, up to US$4 million worth of properties are presently being marketed by property agencies contracted by the group.
“The company is now at an advanced stage of negotiation for the disposal of the PG Safety Glass which will have the effect of reducing borrowings by US$1 million,” said group finance director, Adam Zvandasara.
Although the company accessed a US$3 million loan facility, with US$1,5 million being restructured into a two-year facility, it is the borrowings pegged at an average 18% that have weighed on group performance.
The inception of the multiple currency regime in 2009 witnessed the widespread recovery of the construction sector, in particular the burgeoning of private home building. Consequently, demand on the market for PG’s products went up.
Management then planned to capitalise on the development and snapped up borrowings, at high-interest rates, aiming to retool and increase working capital.
With the emergence of fierce competition from the informal sector, the company’s strategy backfired resulting in the company being saddled with debt.
PG Industries offers a wide range of products and services including timber boards, cement products, hardware, plumbing, glass, windscreens, wood and glass-based value-added products.
However, the company’s Mozambique operation is doing relatively well with a business process outsourcing agreement in place with an international supply chain management company.
The agreement covers upgrading of the company’s logistics, storage and information technology systems for all divisions, while the Mozambique operation is expecting steel products as well as cement for the same branch from Pakistan.
The Tete branch was once the second largest in terms of group sales while an additional branch was opened in Quelimane.
