TA writes off PG investment

HARARE - Diversified investment group TA Holdings (TA) says it has written off its interest in listed building materials manufacturer PG Industries Zimbabwe (PG) to curb further losses.

TA holds a 13 percent stake in PG, which has recorded a fourth consecutive loss since dollarization of Zimbabwe’s economy in 2009 – triggering fears of the company’s imminent collapse.

Gavin Sainsbury, TA’s chief executive, said PG also performed poorly on the Zimbabwe Stock Exchange prompting the decision to forgo the investment.

“We are writing off our investment in PG Industries and will not be reporting any further losses from that investment,” he said.

Sainsbury said the divestment will cost TA $1, 27 million.

PG recorded a net loss of $7,9 million in the year to December 2012, a deterioration from a $5,7 million loss incurred in 2011.

During the period under review, PG’s consolidated net sales slumped 15,3 percent to $33,6 million while liabilities exceeded assets by $6,7 million as it continued to face working capital constraints, particularly in the first half of the year.

Sainsbury said going forward, his group expected double digit growth in underwriting profits as well as improved pre-tax profits for its Zimbabwean insurance and hospitality operations.

Meanwhile, TA’s operating profit grew 238 percent to $5, 6 million in the full year to December 2012 from $1, 6 million recorded prior comparative period.

“The pleasing operating performance was however weighed down by losses incurred by agro-chemicals associate companies amounting to $2,7 million versus a breakeven position recorded prior year,” Sainsbury said.

He noted that the decline in the group’s investment income to $2,2 million from $5,7 million “was largely due to the fact that the 2011 investment income was boosted by unrealised fair value gains of $3,8 million, arising from the revaluation of a commercial building”.

Revenue grew to $72,5 million from $67,5 million registered in 2011, while profit before interest and tax went up marginally to $7,7 million from $7,4.

The group’s insurance division contributed $45 million to total revenue while hotels chipped in $14,8 million.
Sainsbury said the agro-chemical division performed below expectation due to liquidity constraints prevailing in the country.

 “At Sable Ammonium Nitrate production was 28 percent lower than what was produced prior year largely due suspension of electricity supply in the first half of the year,” he said adding that insufficient working capital also affected the importation of ammonia.

Despite having uninterrupted electricity supply in the second half of the year, Sable still performed below par, with capacity utilisation dropping from 34 percent to 25 percent, while ZFC’s capacity utilisation declined significantly from 43 percent in 2011 to 29 percent last year.

TA currently has interests in the hospitality, insurance and agrochemical, asset management and distribution industries.

The group targets privatisation opportunities, equity partnerships, businesses requiring expansion capital and sizeable private equity investments. - John Kachembere

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