Astra Holdings faces liquidity challenges

ASTRA Industries  Limited  is  anticipating a slowdown in  profit growth next year, largely  due  to liquidity  challenges  and low investments,  despite having posted an impressive 99% growth in operating profit in the full year ended August 31 2012.

Report by Gamma Mudarikiri

The  company said  negative the macroeconomic  environment, characterised by low levels of liquidity, coupled with  electricity shortages, relatively  high  operating  costs and rising wage  levels led to serious  viability  challenges for business.

In the period under review, the company’s operating profit surged to US$1,4 million, up from US$750 000 the same  period the last year.

Revenue grew to US$27,1 million, increasing from US$22,7 million.

“In spite of negative factors affecting the economy, the company and its subsidiaries managed to achieve satisfactory  results,” Astra said in a statement accompanying its  financial results.

Sales volumes grew by 17% from prior year, helped by a 20% increase in Astra Paints volumes.  The  company, however,  said  gross margin  recoveries  remained marginally   below those achieved last year.

Company MD McKenzie Mazimbe told businessdigest this week that they had opened new markets, supplying paint to mining companies such as Mimosa and Zimplats.

Sales volumes for the chemicals division, Astra Chemicals, also grew by 14% from the comparative period. However, shortage of raw materials in the period limited growth.

Gross margins for the division, however, marginally improved by three percentage points to 27%.

The Astra group added that the process by the major shareholder Finance Trust to dispose of its major stake was still ongoing.

Finance  Trust invited  new bids  in September  this  year after  the  initial process,  which commenced in 2011, failed  to secure  a buyer.

Astra early this year announced plans to lease its Astra Steel property as part of cost cutting measures. The company last year  stopped operations on the loss- making steel making division also to contain  costs