PG Industries has pinned its recovery hopes on a number of operational initiatives that include what the company termed innovative arrangements with both local and foreign suppliers, following a first half period to June 30 2013 in which tight liquidity pressures constrained performance.
In a statement, PG said although it expected the business environment in the country to remain subdued, it expected activity to continue for the remainder of the year.
The company said its innovative supply agreements with local and foreign suppliers had resulted in significant improvement in accessing key products for the group to distribute through its branch network.
PG signed a three-year business process outsourcing agreement with a South African company — Sherwood International — in order to boost its merchandising division. Under the agreement, PG is contracting the operational responsibility of its business functions and processes to Sherwood.
PG management said going forward, the group would review its structures with a view to significantly reducing overheads.
It would review its business models, particularly those related to merchandising, with a view to improving profitability. The company also planned to restructure its balance sheet by continuing to dispose of properties excess to requirements.
Part of the restructuring would see all strategic business units placed under a single head office structure and back office to remove duplication as well as reduce income tax.
Nevertheless, PG said it continued to face working capital challenges, giving material uncertainty that might cast significant doubt on its ability to continue as a going concern as its current liabilities now exceeded its current assets by US$8,9 million in the period under review. The group reported a net loss for the period of US$2, 3 million.
According to the company’s financials, net revenue increased by 11% to US$16,95 million against a backdrop of softening demand and tight liquidity conditions. Competitive pressure, particularly at the merchandising division, resulted in the overall group gross margin percentage declining from 31 to 27%.
Net operating expenses declined by 10%, with the loss for the period standing at US$3,4 million compared to US$2,7 million in the first half of 2012.
In spite of the foregoing, the group’s merchandising operations saw a modest 4% to US$10,97 million.
“The tight liquidity conditions and competitive pressures that prevail in the market negatively impacted on the performance of the division,” PG said.
Roof tiles manufacturing division Zimtile’s sales grew by 29% to US$4,6 million, driven by strong demand for concrete roofing tiles, bricks and pavers.
“Following the successful commissioning of a new tile-making plant at Zimtile beginning 2012, production capacity and efficiencies have improved. Zimtile is a long-standing trusted brand in the concrete tile manufacturing sector,” the company said.
Plate glass manufacturer and glazing unit PG Glass achieved a 22% increase in sales to US$1,5 million on the back of an improvement in stocking levels.
In April, PG successfully concluded disposal of its entire stake in Manica Board and Doors (MBD) as part of a recovery strategy.
At the time, group CEO Hilary Munyati said 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.