CAIRNS Holdings Ltd will convert its short term debt into long term borrowings, a move that will see the company returning to full profitability by 2013, according to CEO Silas Gweshe.
He said the group was engaging banks to consider converting all short term borrowings to long term debt, a development he said would avail more working capital and increase volumes.
Gweshe said the debt restructuring plan would ensure the group breaks even by financial year end 2012 and realise a modest profit in 2013.
“Full profitability should be achievable from year two of the strategic turnaround plan in 2013 onwards,” Gweshe said.
The company’s borrowings stand at US$11 million, of which US$$7 million represents the capital amount borrowed, he said.
Gweshe said as part of the turnaround plan Cairns had engaged the Zimbabwe Electricity Supply Authority (Zesa) to reduce power cuts.
He said this would improve capacity utilisation.
The average group capacity utilisation is 25% and continues to be weighed down by ageing plant and equipment averaging between 10 and 25 years across all SBUs.
Gweshe said there was need to upgrade technology and remove processing bottlenecks in plants across the divisions.
Snacks contribute 35% to the revenue while groceries chip in 20%. Vegetables contribute 15%, beverages 5% while the troubled Charhons holds the remaining 25%.
The company currently employs 680 permanent staff from 1000 in 2009.
The company has, however, revived operations in Mutare to produce Cashel Valley baked beans and Sun Jam, a once popular fruit jam.
The prevailing harsh economic environment has resulted in continued depressed business performance, forcing the company to take a number of cost reduction measures such as reduced working weeks.
The company last year reduced salaries and working hours for its workforce by 50%.
Gweshe said future improvements in employment numbers would be driven by a corresponding increase in the level of business activity.
He said liquidity challenges would inhibit the full implementation of strategies to boost capacity utilisation.
Cairns posted a turnover of US$19 million for the year ended August 31 2011 compared to US$25 million for the same period in 2010.
Although the group managed to reduce costs by 20% to US$4 million last year, Cairns recorded a US$8 million loss for the full year to August 30, 2011.
High costs of production presented challenges to the firm in dealing with external competition.