PG Industries issues fresh cautionary

Published: 04 December 2013

PG Industries issued a cautionary on Wednesday as the group said it was involved in negotiations which will have a material effect on the company.

"Shareholders are advised that the Company is currently involved in negotiations, which if successful, may have a material effect on the future of the Company.

"Accordingly, shareholders are advised to exercise caution when dealing in the Company's shares until a full announcement is made," said the Company Secretary K Waniwa.

PG Zimbabwe is highly geared and heavily undercapitalised to the extent the balance sheet has negative equity.

Management plans to sell off excess properties and use the proceeds to reduce bank borrowings. It is 12 months now since management got shareholder approval to sell the excess assets and nothing has materialised due to tight liquidity.

PG Industries is one company that many expected to benefit from the dollarised environment. This is because the stability ushered by the new environment enabled individuals to save towards building their own houses.

As such, companies in the construction and allied sectors were expected to benefit. Unfortunately, this potential has not materialised for PGIZ.

The company has continued to record losses and financial results recently published for the six months to June 30 2013 show that it is still deep in the red. The company's financials were highly summarised, making them too vague to make any meaningful analysis out of.

This, however, is to be expected for struggling companies as management try to conceal the actual state of 'affairs' at the company.

Rescuing PGIZ appears to be an uphill task as there are a slew of manacles clamping the company's operations. Inadequate working capital is its biggest challenge, resulting in the company resorting to expensive short-term bank borrowings.

This has resulted in the company recording huge losses owing to high finance charges.

The ideal solution would be for shareholders to inject cheaper long-term finance into the business. However, shareholders are unlikely to take this route as they still require answers to what the $11,2 million invested in the business in 2010 was used for.

The main shareholders, namely TA Holdings and ABC, have already written off their investments in the company, which is a clear indication they have lost confidence in its survival.

During ZSE trades PG remained offers only at 0.1c and has a year to date loss of 80%.
- businessdaily