Phoenix to dispose of unit

HARARE - Listed diversified concern Phoenix Consolidated Industries Limited (Phoenix) is mulling selling one of its units to reduce borrowings.

“The company has been approached regarding the potential purchase of one of its operating units,” the group said in its financials for half year ended April 30, 2013.

It said the transaction could reduce borrowings by up to $2 million.

The group — which was badly affected by the hyperinflationary period and subsequent liquidity challenges following adoption of the multi-currency system in 2009 ? says it is expecting to benefit from the expected upturn in the economy.

Last year the group also disposed of one of its units, McMeekan.

This comes as it narrowed its losses to $228 000 during the period under review, after net finance charges of $330 000 and depreciation of $249 000, from $477 000 incurred in prior comparable period.

Earnings per share declined in the six months to April from a loss of $0,55 in 2012 to $0,26.

In the period under review, the company’s plastics and allied units were profitable with William Smith and Gourock maintaining its position as the most profitable unit.

“Sales at Phoenix and Brushware remained static, while William Smith and Gourock experienced a reduction,” said Phoenix.

Phoenix has the largest distribution network of heavy industrial, mining and domestic products in Zimbabwe, from brush ware, plastic-ware, bathroom suites to forklifts and pumps.

Phoenix’s major customers include supermarkets, hardwares, urban and rural councils, industries aligned to mining, agriculture and construction. The company also exports to South Africa, Zambia and Malawi.

The group’s steel and allied units reported increased turnover over the equivalent period but at reduced margins.

“Liquidity problems at the major hardware outlets and mining concerns have led to reduced sales despite potential demand. Scandia has maintained its export market but the depreciation of the Rand has further reduced margins,” said the company.

Phoenix noted that these units have the capacity to significantly increase sales without additional overhead costs and consequently will benefit from any upturn in the economy. Phoenix is a broad-based group of manufacturing industries.

The company’s subsidiaries are Scandia Steel Wire, William Smith and Gourock, John W Searcy and Phoenix Brushware.

In 2011, the company embarked on additional sales efforts, targeting both niche and traditional markets, backed by quality, competitive pricing and service.

However, a shrinking domestic market and tight liquidity continued to be the company’s major challenge.

This has forced the company to adopt strategies to increase market share in an environment that is not expected to grow significantly in the short term.

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