PG Industries Zimbabwe Ltd (PG) has successfully concluded disposal of its entire stake in Manica Board and Doors (MBD) as part of a recovery strategy, a company official said.
PG has been in a rut after incurring huge losses since the adoption of multiple currencies in 2009, having a loss position of US$7,9 million as at December 31 2012.
Group CEO Hilary Munyati told an analysts’ briefing on Wednesday the company’s directors had approved disposal of MDB and all shareholding in the board and door manufacturer had been sold to other players.
PG’s stake in MBD had been reduced from 60% to 27 % in early 2012 following a rights issue.
Its shareholding was later reduced to 9% in the first quarter of 2013 after it managed to dispose of 18,9% equity in MBD for US$2,4 million against a book value of US$1,6 million.
“I can say the transaction is complete because negotiations are complete. In fact, it has been paid for in cash and the cash has been received,” said Munyati during the company’s annual results presentation for the full year to December 2012.
The PG board had also approved placing its strategic business units (SBUs) under one single head office structure and back office to remove duplication of head office functions as well as reduce income tax.
Asked to give estimates of retrenchment costs after the corporate restructuring exercise, Munyati said: “It’s premature to give the extent of retrenchments and the total cost, but it remains a possibility.”
PG is also pinning its hopes for recovery on the success of a three-year business process outsourcing (BPO) agreement which it signed with a South African company — Sherwood International — late last year.
BPO involves contracting some of the operational business functions and processes to a third-party service-provider. In addition, Sherwood is upgrading PG’s IT system. The South African firm is using its international footprint to procure supplies for its Zimbabwean partner.
Munyati said PG was for the first time seriously venturing into importing cement from Pakistan for local distribution. The cement will be shipped through Mozambique, where PG has a branch.
Building material suppliers and contracting firms in the region were focusing on Mozambique’s town of Tete, where massive infrastructure projects are underway following discovery of huge gas reserves in the Tete province.
As a result of the new strategy, PG projects a 28% growth in sales to US$45 million, driven by an anticipated 60% growth in the group’s glass business and a 35% growth in the concrete business, Zimtile.
The group suffered a lower operating loss of US$4,9 million from US$6,2 million in the prior year, helped by higher margins and lower operating costs.
Net sales slid 15% to US$33,6 million from US$39 million after gross expenses fell 7,5% to US$15,3 million in 2012 compared to US$16,5 million last year.
The fall in net sales is attributed to non-consolidation in the accounts of MBD’s US$6 million sales, and a decline in volumes at merchandising division PG Building Supplies.
PG Building Supplies, PG Timbers and PG Mozambique made an operating loss of US$3,2 million, down from US$2,8 million prior period, after sales also slid to US$22,7 million from US$25 million.