HARARE – Zimbabwe Stock Exchange listed construction concern PG Industries Limited (PGI) has recorded a net loss of $2,7 million for the six months to June, attributed to working capital constraints, low retail sales volumes and high interest burden.
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 last four years scaled down operations, embarked on a retrenchment exercise and closed 38 branches to remaining with only 22.
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 $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 $4,35 million.”
Munyati said proceeds from these investments would be used to retire the group’s debts and deal with the working capital challenges.
PGI current liabilities exceed current assets by $6,8 million.
In the half year to June 30 net revenue for the group declined by 16 percent to $15,2 million from $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 reducing 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
$467 024 to $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 $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 $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 $868 000 compared to $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 641. – John Kachembere