Announcing the company’s results , chairman of Zimpapers Group Paul Chimedza said tight liquidity challenges on the market led to high borrowing costs, the high cost of imported newsprint due to shortages locally and the entrance of new competitors negatively affected the group’s performance.
The depressed performance saw total revenues for the year 2011 go up a marginal 9% to US$36,573 million from US$33,482 million recorded in the prior year. Costs grew at a greater pace with cost of sales increasing 17,5% from US$11,146 million to US$13,095 million whilst other operating expenses made up of administration, selling and distribution expenses rose 19,7% to US$27,041 million compared to US$22,593 million in 2010. Reliance on expensive short term borrowings saw the group’s finance costs rise sharply by 674,5% to US$544,821, from a prior year figure of US$70,341 and the group resorted to selling off some of its non-productive assets to raise funds.
Negative operating results also depressed the group’s cash-flows, resulting in its net cash position deteriorating from a negative US$479,557 in 2010 to a closing negative balance of US41,158 million in 2011.
The commercial printing division continued to make losses, recording a loss of US$1,2 million in 2011 compared to US$42,1 million in 2010, despite a re-organisation exercise carried out in 2011.
The company attributed this loss to obsolete equipment which now needed massive refurbishment.
The group has pinned its hopes on its newspaper division that management is confident should continue to hold fort despite increasing competition.
The group is also counting on its new radio project for a change in its fortunes following the granting of a commercial free-to-air radio licence last year. Broadcasts are expected to commence in April 2012.
To reverse costs and return to profitability, Zimpapers plans to look for alternative, cheaper sources of finance whilst refurbishment of plant and machinery is expected to improve capacity utilisation, quality and turnaround times and therefore influence revenues and profitability.