Hunyani Holdings Ltd is restructuring and refurbishing its plant after internal and external auditors revealed that the group’s Bulawayo division – Printopak — had overstated its profit to US$423 000 when the actual figure was US$64 000.
A senior official at Hunyani Holdings told businessdigest yesterday that the group had embarked on the restructuring which is expected to be complete before the end of the month.
“The restructuring exercise is ongoing, its main objective is to weed out individuals with no value addition at the group, re-assigning some individuals and hiring professionals we feel can take the company to another level,” a senior official who requested anonymity told businessdigest.
This week the company’s share has been stagnant at 3,5c, dropping by about 100% when the “fraud” filtered through the market.
The official could however not reveal the names of the culprits but added that they forged the results to cover up poor performance by their division.
Hunyani’s main business is manufacturing pulp and paper, printing and packaging products and development of timber.
During the hyperinflation environment, most Zimbabwean companies could cover poor performance with big figures which in real terms reflected viability problems.
“Our plant is currently being refurbished. A voluntary retrenchment offer was accepted by all Pulp and Paper employees, which will reduce losses being generated by the Mill whilst it is on care and maintenance,” the official said.
The official said irregularities were unearthed after an enquiry in the lower than expected performance of the Bulawayo division.
“New set of results would be released soon after our internal and external auditors unearth these shortcomings,” said.
Hunyani Printopak sales had been overstated by US$767 000, the adjustment for which has now rendered the division loss-making, and the group’s profit slashed to US$64 000 as at July 31, 2010.
For the six months to April, the group had recorded a US$423 000 profit.
In a statement to shareholders, Hunyani said external auditors were also instructed to prepare an independent report on the matter.
“Both investigations concluded that divisional sales and therefore profits had been overstated, the adjustment for which has now rendered the division into a loss making position and the group into marginal positions as at July 31 2010,” the statement said.
“The reports reveal that the overstatement had been made by divisional management in order to conceal poor performance. Disciplinary procedures have been implemented. The management of the division has been completely re-structured,” said Hunyani.
Hunyani said Printopak sales adjustment would significantly reduce the group’s full year profits.
The group’s revenue for nine months to July marginally increased to US$24, 8 million from US$23,2 million a year earlier.
The company said world paper prices had continued to rise, reducing margins of fixed packaging on fixed price packaging contracts.
”The negative effects of this have been partially offset by increased demand for tobacco packaging as a result of larger-than-expected crop. Margins in this highly competitive environment remain small,” Hunyani said.