Phoenix looks to halve borrowings

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LISTED Industrial conglomerate, Phoenix Consolidated Industries Limited, has said it was working on reducing its borrowings which currently stand at over US$2 million by about half to break even after experiencing a tough six month to April this year.
Phoenix incurred a loss of US$228,000 which included net fiancé charges of US$330,000 and depreciation of US$249,000 for the half year ending April 30. This compares to a loss of US$477,000 for the equivalent period.
The company said, demand for product however remains strong but sales have been restricted by stringent credit control.
“The major hardware outlets have been unable to purchases significant volumes within their credit terms,” the company said.
“Major contractual customer spending remains low, especially affecting sales at William Smith & Gourock. As a consequence of the liquidity crunch, pricing has become increasingly competitive resulting in reduced margins.
“Plastic and Allied (incorporating William Smith & Gourock and Phoenix Brushware) were both profitable with William Smith & Gourock maintaining its position as the most profitable unit. Sales at Phoenix Brushware remain static, whilst William Smith & Gourock experienced a reduction.
Turnover at Steel & Allied (incorporating Scandia Steel & Wire, JW Searcy) increased over the equivalent period but at reduced margins.
“Liquidity problems at the major hardware outlets and mining concerns have led to reduced sales despite potential demand,” the company said.
Speaking after the company’s AGM recently, chief executive, Francis Rodrigues, said the level and cost of borrowing was affecting the group’s performance, resulting to the company anticipating a “loss” during the interim period to April.
“We have had a tough first half despite the fact that it is usually a quiet period for us,” he said.
“The individual units traded mixed and we are now working on reducing our borrowings which has been a big challenge for us and expect to break even by October. Cheaper longer term funding is being pursued both on local and foreign financial markets.”
During the second half of the year, Phoenix expects to benefit from temporary infrastructure required for the elections, the road network, rehabilitation of water purification and sewerage plants and re-fencing of farms.Advertisement

“The tight liquidity situation currently prevailing in the country is also affecting the group’s performance and coercing an increase in borrowings at high interest rates,” Rodrigues said.
Commenting on the company’s outlook after the interim results Phoenix said it had the capacity to benefit from the expected upturn in the economy.
“The company has been approached regarding the potential purchase of one of its operation units. It is envisaged that any such transactions could reduce borrowings by up to US$2 million. Shareholders will be advised as and when these negotiations become more concrete,” management said.
On the performance of individual units, Rodrigues said Phoenix Brushware was profitable but, to improve the unit’s performance, there was need to put some money into capital equipment.
“The major challenge faced by the unit is the depleting market for brushes. Scandia Steel and Wire was making losses for the first three months in 2013 but is now profitable,” he said.
Rodrigues also said the company was currently exporting Scandia’s products to South Africa, Namibia and Zambia and was looking at entering the Mozambique market in the Tete area.
“William Smith and Gourock was the best performer last year and again is the best performer so far this year. J W Searcy also performed well in the first five months of this year.”