PG Industries (Zimbabwe) Ltd says the major challenges being faced by the company include business confidence and the associated low levels of local demand, high interest rates and uncertaint
y regarding access to productive sector finance.
Small builders last week also castigated the operations of the productive sector finance scheme saying they were being left out in favour of larger enterprises.
Construction companies and building contractors and registered members of the Construction Industry Federation of Zimbabwe (Cifoz) qualified for the scheme but not the small-scale Zimbabwe Building Contractors’ Association (ZBCA).
“The commercial environment is expected to continue to be difficult in the coming year,” said PG chairman Enos Chiura. “The major challenges being business confidence and the associated low levels of local demand, high interest rates and uncertainty regarding access to productive sector finance and exchange rate availability and policy constraints.
The group has progressively taken measures to arrest the deterioration in its performance although many of the circumstances continue into the first quarter thereby affecting profitability for this period.”
Chiura said the group had taken a position to retain its presence in the key export markets, as it believed this was beneficial in the long run.
“The movement in the exchange rate is showing some positive impact on profitability and cash flow of the exporting businesses,” he said. “Measures to generate cash are already in place and include a tighter working capital management and cost reductions.”
He said the board was therefore taking a conservative view and would focus on consolidating and rationalising the business in order to preserve shareholder value.
Meanwhile for the year ended March 31 PG annual turnover of $172,4 billion compared to $23,8 billion for the prior year.
Operating income before interest reached $34,7 billion compared to $6,2 billion last year.
Interest charges increased to $21,6 billion compared to $0,4 billion in the prior year.
Export volumes grew helping export turnover to increase from $6,6 billion to $44 billion.
Chiura said the appreciation of the Zimbabwe dollar in the fourth quarter had a material negative impact on export earnings in the fourth quarter.
“The group had a seasonally high investment in inventories when local demand suddenly collapsed in December 2003,” Chiura said. “This combined with renewed demands for prepayments in foreign currency for essential imports, depressed trading results including lower receipts on exports as the currency appreciated and punitively high interest rates, resulted in the interest charge for the year rising to $21,6 billion.”
He said the glass business’ performance in particular deteriorated significantly due to problems of raw glass sourcing and the currency impact on exports.
This had a significant impact on the group performance in the fourth quarter.
“The group registered a loss in the second half,” he said.
Chiura said turnover in the glass division was $30,6 billion.