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PGI approves MBD equity disposal
12/12/2012 00:00:00
by Roman Moyo
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PG INDUSTRIES shareholders have approved a plan to dispose 27, 9 percent of the company’s stake in Manica Boards and Doors (MBD), hoping to raise about US$2, 9 million.

The shareholders agreed during an extraordinary meeting on Wednesday to also sale properties that were in excess of group operational requirements.

Once regarded as one of Zimbabwe’s major construction hardware players, PGI has struggled to make an impact in the dollarised economy and has over the past four years drastically scaled down operations.

The company has also laid-off thousands of workers and shut down 38 branches, remaining with only 22. Executives are hoping to use the equity disposal proceeds to pay off a US$1, 35 million debt held by MBD.

Some of the proceeds are expected to be used to increase the tile plant capacity to 40, 000 tiles from the current 22, 000 by the acquisition of extra tile pallets.

Besides the pallet shortage, Zimtile has no other operational challenges and should the sales go through and the investments be done, the tile business is likely to increase its topline, officials say.

The total market demand for concrete roofing tiles is around 150, 000 but the whole tile industry in Zimbabwe is currently producing 80, 000 tiles.

PG Industries recorded a net loss of US$2, 7 million for the six months to June 30 2012, attributed to working capital constraints, low retail sales volumes and high interest burden.

Hillary Munyati, group chief executive told analysts on Monday that although they had put in place various strategies to see the group operating on a going concern basis, full potential will only be realised if more working capital is injected into the business.

“The board approved the following initiatives to start addressing the group’s working capital and gearing challenges,” he said.

“We are looking forward to dispose properties not being utilised by PG businesses with a book value of US$5, 15 million, and a disposal of the remaining investment in an associate company and recovery of loan investment in the associate company with a combined book value of US$4, 35 million.”

Munyati said proceeds from these investments will be used to clear the group’s debts and deal with the working capital challenges.

PGI’s current liabilities exceed its assets by US$6, 8 million.

In the half year to June 30 net revenue for the group declined by 16 percent to US$15,2 million from US$18,2 million in the previous period due to non-consolidation of Manica Boards and Doors (MBD) results and a decline in merchandising division volumes.

Munyati said the recapitalisation of MBD was successfully concluded at the beginning of the year, resulting in the group’s shareholding interest slackening from 60 percent to 27,9 percent.

“Despite the decline in net revenue, consolidated gross profit increased due to improved manufacturing efficiencies at Zimtile and realisation of better margins by the merchandising division,” he said.

Improved margins and savings in costs resulted in consolidated operating loss narrowing by
US$467 024 toUS$2 697 326.

The major challenge was in retail, Munyati said.

The group had combined the operations of PG Building Supplies, DST and PG Timbers and reduced the branch footprint to 22 from 34.

Sales declined by 12 percent to US$10,5 million.

However, working capital constraints hampered restocking activity.

“PG Building supplies stores were not adequately stocked resulting in significant decline in sales volumes. However, PG timbers and PG Mozambique posted impressive sales growth rates. An additional branch was added in Quelimane during the period,” he said.

The Glass division underperformed due to the unit’s inability to consistently source adequate volumes of glass registering an operating loss of US$73 000.

After successfully commissioning a brand new roofing tile factory in December 2011, Zimtile’s gross profit increased by 24, 6 percent to close the period at US$868 000 compared to US$551 000 recorded in the corresponding period.

“High sales volumes started being realised from May 2012 after securing working capital funding. The division achieved satisfactory improvement in margins as a result of efficiencies realised from the new technology,” said Munyati.

In the period under review the group reduced its workforce from 1 271 in June 2011 to 64


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