Cairns secures $1m loan

Published: 01 November 2013

FOOD and beverages manufacturer, Cairns Holdings Limited, has secured a $1 million loan from the Distressed Industries and Marginalised Areas Fund (DIMAF) for capital expenditure and working capital requirements. DIMAF is a $40 million five-year revolving fund set up jointly by government and Old Mutual Zimbabwe in 2011 with the objective of resuscitating ailing companies in the country.

Each party contributed $20 million. The money is disbursed through Old Mutual's banking subsidiary Central Africa Building Society (CABS).

Cairn Holdings' judiciary manager, Reggie Saruchera of Grant Thornton Camelsa, told The Financial Gazette's Companies & Markets (C&M) that funds would be used to acquire new packaging equipment from China and South Africa.

He said the equipment would be in the country before the end of December.

"We secured the loan through DIMAF and we will use it for capital expenditure and working capital purposes," said Saruchera.

"We are acquiring packaging equipment and we are rehabilitating our plants. We expect the equipment to be in the country by December."

The funds come as a welcome boost to the company given the challenges it has been experiencing.

The company suffered considerably since dollarisation and the crisis has seen divisions in Bulawayo, Harare, Gweru, Masvingo and Mutare being shut down.

The firm has struggled to survive due to competition from cheap imports and lack of working capital.

Its capacity utilisation has failed to rise beyond 30 percent, with constant machine breakdowns compromising production and making it difficult to compete with cheap imports from South Africa.

Last year, Cairns Holdings applied for voluntary judiciary management after facing operational challenges and failing to raise $20 million in fresh capital.

The company faced huge operational problems that included a $11 million debt, 65 percent of which is owed to banks.

It plans to use proceeds from the disposal of some non-core assets to pay off some of its debts.

Among the assets earmarked for disposal are the factories in Mutare, Bulawayo and Charhons in Harare.

The company is currently in negotiations with potential investors to acquire a controlling stake held by the Reserve Bank of Zimbabwe (RBZ) in the company.

Cairns Holdings is one of the companies from which the RBZ wants to divest its shareholding.

In May 2011, the RBZ Governor, Gideon Gono, said the central bank was selling shareholding in several companies to raise money to settle debts which stood at over $1 billion.

The central bank holds a 67 percent stake in Cairns Holdings through its investment unit, Finance Trust of Zimbabwe.

Sources said a South African based multi-asset investment company, Vasari Global Holdings, is one of the companies interested in acquiring a controlling stake in Cairns.

Other bidders include Zimbabwe Stock Exchange-listed Dairibord Holdings, Judah Holdings Limited and Eastern Trading Company of South Africa.

Judar Holdings is into agriculture, brick moulding and mining while Eastern Trading is into canning.

Dairibord Holdings once flirted with Cairns when it bought and later sold a 40 percent shareholding in ME Charhons, a subsidiary of Cairns Group.

The investor would be assessed on the amount set aside for working capital, refurbishment or replacement of plant equipment in the medium to short-term and their ability to turnaround the group.

A deal was recently concluded for the disposal of a 49 percent RBZ interest in Astra Paints to Japanese paint manufacturing giant Kansai Plascon. The stake was sold for $5,5 million.

The RBZ also pulled out of Tractive Power Holdings after selling its 57 percent interest to Zimplow for about $9,7 million.
- fingaz