Phoenix Consolidated Industries’ reported a poor performance in the first half of 2013 largely due to restrictive credit control systems and a general liquidity crunch in the economy.
Report by Staff Writer
In the group’s half year statement for the period to April 30, Phoenix said despite a strong demand for its product, sales remained restricted by credit control and illiquidity.
“The major hardware outlets have been unable to purchase significant volumes within their credit terms. Major contractual customer spending remains low, especially affecting sales at William Smith Gourock,” the company said.
“As a consequence of the liquidity crunch, pricing has become increasingly competitive resulting in reduced margins.”
The group incurred a US$228 000 loss in the period under review including net finance charges of US$330 000 and depreciation of US$249 000.
Last year, the group reported a US$477 000 loss in the comparative period.
Revenue for the period under review stood at US$4,7 million, down from US$5,4 million recorded in the first half of 2012 while cost of sales amounted to US$3,6 million and US$4,2 million in the first half of 2013 and 2012 respectively.
Gross profit for the period was US$1,1 million before distribution costs worth US$448 000 and administrative expenses which gobbled another US$603 000.
Total group assets, comprising US$5,7 million worth of noncurrent assets and US$4,9 million in current assets, remained flat at US$10,6 million compared to US$10,7 million at the end of 2012.
Total equity stood at US$4,7 million compared to US$5 million at the end of 2012 while total liabilities stood at US$5,8 million.
Noncurrent liabilities stood at US$1 million while current liabilities amounted to US$4,8 million in the period under review. Going forward, the group’s focus is to reduce borrowings by up to US$2 million through disposal of one of its units to a potential buyer who has already initiated negotiations for the deal.
On operations, Phoenix said its plastics and allied business — William Gourock and Phoenix Brushware — was profitable while its steel and allied units — Scandia Steel & Wire and JW Searc– increased turnover despite the liquidity crunch.
“Liquidity problems at the major hardware outlets and mining concerns have led to reduced sales despite potential demand. Scandia has maintained its export market but the depreciation of the Rand has further reduced margins,” said the company, adding both units have potential to significantly increase sales without additional overhead costs.
Earlier this year, Phoenix CEO Francis Rodrigues said the company was set to break even by year-end and posting a marginal loss by half year.
At the company’s annual general meeting held in May, Rodrigues said the first four-five months of the financial year had been difficult, worsened by the liquidity situation prevailing in the economy.
In the short-term, Phoenix expected to benefit from temporary infrastructure required for the elections, much needed re-fencing of farms and to rehabilitation of water purification and sewerage plants.