Dimaf cash boosts General Belting

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ZIMBABWE Stock Exchange-listed General Belting Holdings is still haggling with debt which is negatively affecting the company’s operations.
The group is now pursuing a debt restructuring plan as it seeks fresh capital to recapitalize its business.
Borrowing costs have eroded the company’s bottom line, triggering fears of liquidation had it not been for the aggressive approach by management to raise money and contain costs.
After receiving funding believed to be close to US$2 million from the government’s Distressed and Marginalised Areas Fund (Dimaf) the company also used its land and buildings to raise addition money.
In a statement accompanying the group’s financial results chairman, Godfrey Nhemachena, said the positive impact of Dimaf funding had “demonstrated the company’s capability if adequately funded”.
“To this end the fund raising initiatives and restructuring of the current debt is being pursued,” he said.
The debt restructuring would allow General Belting to reduce and renegotiate its delinquent debts in order to improve or restore liquidity.
The company’s total liabilities rose to US$9,6 million for the year to December 2013 from US$7,8 million during the same period last year.
Nhemachena said the disbursement of Dimaf funds in the first quarter of the year resulted in significant raw materials cost savings and enhanced the company’s market competitiveness.
“The benefit of this initiative dissipated during the latter course of the year as demand plummeted owing to the liquidity crunch in the economy which resulted in poor debtor performance and longer working capital cycles,” Nhemachena.
As a result, volumes at 990 metric tonnes were 19 percent lower than the prior year’s 1 228 metric tonnes while turnover at US$3,8 million was 26 percent lower than the previous year.
“Administrative and operating costs were 12 percent higher than prior year despite a debtors impairment charge of US$700 000,” said Nhemachena.
The Dimaf facility is said to have come with strict conditions, the major one being that funds would be used for raw materials procurement.
The cost of funds had gone down as a result to around 16 percent from an average 30 percent. Dimaf was released at a cost of 10 percent.Advertisement

The funds were drawn down in March this year and strictly applied towards raw materials. The facility is expected to enhance the company’s strategic positioning and market competitiveness.