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PG seeks to recapitalise

PG INDUSTRIES is seeking to recapitalise its operations and settle aUS$6,6 million debt, the company announced last week.

PG issued a cautionary statement last Friday advising shareholders that details of the proposed recapitalisation exercise would be provided in a circular which would be published before the EGM on November 16 where they intend to raise US$10 million to pay off its debt.
“Detailed terms and conditions of the proposed recapitalisation exercise . . . to be considered at the EGM will be provided in the circular to shareholders, which will be published prior to the EGM,” reads the statement in part.
It is the group’s second capital raising phase after successfully raising about US$4,5 million during the initial phase.
The company was initially hunting for US$15 million but only managed to raise US$4,5 million.
It is not clear which route the company will seek to raise capital. 
Addressing an AGM in August PG Industries CEO Hillary Munyati said: “The group will soon come to the market for a second recapitalisation to boost productivity and retire debt”. He said the capital raising exercise was also expected to pay creditors, replenish stock, retire some expensive borrowings and provide refurbishment or plant replacement at the concrete, glass and board operations.
The group was forecasting a 60% increase in revenue during the second quarter of the year on the back of strong sales volumes but sees a half year loss.
PG suffered a US$7,6 million loss before tax in the year ending March 31 2010.
“The group had suffered losses in all Small Business Units during the first quarter of the year which was attributed to low stocking levels and high expense ratios,” Munyati said
PG is a manufacturer of fibre
board, particle board and safety glass and distributes board glass, timber and related building materials through its network of outlets and third parties in domestic, regional and international markets.
“Demand for products was strong but the group could not take advantage of that due to a shortage in working capital,” Munyati said.
Munyati said the group expects Zimtile and PG Glass to return to profit, a break-even in PG Merchandise while the MBD division, which was shut down in June and July for maintenance, would continue in a loss position.
“Capacity utilisation for safety glass had improved to about 32% from 4% during the first quarter of the year and is forecast to end at about 38% during the second quarter of the year,” he said.
Zimtile recently acquired a tile extruder and its capacity utilisation is said to be over 60%. PG said it had deferred plans to expand operations to Zambia as it focuses on improving profitability of its Zimbabwe operations.
Between 2009 and 2010, the group recorded an operating loss of US$5,2 million after recording a turnover of US$23,8 million. The group said that one of its traditional strong performers, distributor PG Merchandising, recorded an operating loss of US$2, 8 million, driven primarily by lack of adequate funding to stock the distribution network with the right products.
The liquidity crunch that has hit the Zimbabwean economy of late, resulting from minimal foreign direct investment inflows, weak economic activity and clogged external lines of credit, has affected PG’s local and regional operations.


Paul Nyakazeya

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