Turnall mulls retrenchment

HARARE - Listed roofing materials manufacturer Turnall Holdings is mulling to retrench as part of strategies to contain costs and survive Zimbabwe’s harsh economic environment.

The group’s marketing manager, Caleb Musonza, said the company was considering the route as it “exploits all possible cost cutting mechanisms”.

“At this point in time, what I can say is that we are exploring various cost alignment options and when you do that, certainly you look at options like retrenchment and retirement packages,” he said.

This comes as the group’s managing director, John Jere, recently resigned.

Musonza said the company, which recorded a $3,5 million loss before tax and a $2,6 million operating loss in the half year to June 2014, was currently considering giving early retirement packages, but was yet to finalise the matter.

He said while the plan was still in the pipeline, it could not be ruled out completely.

“If we have people that can go on early retirement what is realistic is how much can we save. It is something that we are currently exploring before we make a final call,” he said.

According to Musonza, about $18 million was collected from debtors during the period under review.

He said the collections provided cash flow to run the business.

“...you no longer have challenges to buy this and that. This is all thanks to our new cash model.”

“I cannot yet give an exact figure of how much is left to be paid by the debtors, but what I can say is right now we are still discussing,” he said.

The asbestos manufacturer — 58,32 percent owned by financial group FBC Holdings Limited (FBCH) — recorded an operating loss of $111 875 in the half year to June 2014.

In the half year to June 2014, its gross profit stood at $872,425 compared to $4,2 million realised in prior comparable period and $10,5 million as at December 31, 2013.

Total assets dropped to $62,6 million from $70,1 million.

The group’s chairman, Hebert Nkala, said adverse economic factors weighed heavily on the firm, resulting in eroded demand amid liquidity problems and declining production volumes.

He said erratic raw material supply mainly due to cash-flow constraints and low capacity utilisation at 45 percent, resulted in increased cost of production and reduced margins.

In July, FBCH’s chief executive John Mushayavanhu said they expected the loss-making Turnall to return to profitability by year end.

He said Turnall’s performance was below expectation, prompting the group to change its business model from a credit sale approach to a cash sale approach.

“Customers were put on a cash upfront basis. Initially, there was resistance in the market to this new business model and therefore sales volumes suffered in the first quarter,” he said, adding that, however, “volumes have picked up as most customers have since run down their stock levels”.

“We are therefore anticipating Turnall to make a loss in the first half of the year 2014 and to return to profitability in the second half of the year,” he said.

 

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