Turnall Holdings Ltd has successfully concluded payment arrangements with key creditors it owed US$29 million in a crucial deal that will go a long way in restructuring the company’s capital structure. Turnall owed creditors US$29 million in both current and non-current liabilities. However, the bank is failing to agree with FBC, BancAbc and CABS, which had combined claims against the company of US$7,5 million.
By Melody Chikono
The group’s gearing ratio — proportion of funding provided by debt relative to finance given by equity (shareholders) — has been preventing the tile, asbestos and pipe manufacturing entity from accessing working capital amounting to US$4 million. Although there has not been much movement yet in terms of sourcing working capital, Turnall FD Samson Mavende told businessdigest on this week that the new balance sheet will enable the company to secure working capital from financiers. The company has been operating with internally generated cash flows. “The company has made payment arrangements with creditors who make up over 90% of the company’s creditor balances. The company’s legacy creditors mainly arise from payroll deductions and tax liabilities. The new balance sheet (after debt restructuring and securing payment arrangements) will enable the company to secure working capital from financiers,” Mavende said.
The group has successfully restructured its short-term debt to medium-term through the Zimbabwe Asset Management Company (Zamco). This is expected to reduce the firm’s cost of borrowings and remove the bulk of the bank penalty and punitive interest cost which totalled US$500 000 in 2017.The debt is repayable over six years at an interest rate of 10% per annum.
“Turnall’s balance sheet will be stronger reflecting a much lower net current liabilities position. This will improve the company’s ability to pay its debts and trade out of its negative working capital position,” added Mavende. Turnall also had other certain funding initiatives that were largely dependent on the successful completion of the balance sheet restructuring process.
In the year to December 31 2017, Turnall’s turnover increased 12% to US$19 million compared to US$16,9 million in 2016, while sales volumes increased by 9%, a first after three years of consecutive declines.
During the period, production volumes increased by 32% due to improved working capital management and improved raw material stocks availability.
The group launched exports into the region in the first half of the year, but sales were not significant as the it was still in the market development stage.
Turnall also expects to upgrade its asbestos cement (AC) plant during 2018 to increase throughput and competitiveness of its products to further reduce manufacturing costs.
Turnal turnover for the year 2017 rose to US$19,026 million compared to US$16,989 million in FY16.
Production volumes increased by 32% due to improved working capital management and improved raw material stocks availability.
“The Group relaunched exports into the region in the first half of the year, but sales were not significant as the group was still in the market development stage. Export sales were also constrained by pricing issues owing to high cost of production in Zimbabwe,” the company said.
“To further reduce manufacturing costs, the Group will upgrade its asbestos cement (AC) plant during 2018 to increase throughput and this will improve competitiveness of its products.” The group’s gross profit for the year was US$6,8 million up from US$1,9 million in 2016. The improvement is attributed to technological innovation, cost control, procurement efficiencies and increased capacity utilisation.