Gavin Sainsbury, the TA Holdings CEO told an analysts briefing that the group had been prompted to review its shareholding in PG as overheads had proved to be significantly higher than turnover.
PG Industries incurred a loss before tax of US$3,8 million against a loss before tax of US$3,4 million for the same period last year. The three major loss making units were PG Building supplies, DST and Manica boards and Doors which incurred losses of US$1,2 million, US$760 000 and US$500 000 respectively.
Undercapitalisation and increasing costs have previously been attributed to the company’s loss making position, which has severely impacted on margins.
“It’s one thing to buy an asset and another to dispose of it,” Sainsbury said.
“Given BancABC publicly stated intention to dispose (of its 15% stake in PG), we have determined that this investment is no longer core to our group and we will review our options in this regard.”
TA Holdings acquired a 30% stake in PG Industries in 2009, in a deal that was expected to redefine the group’s investment strategy. PG operates in various sectors including building supplies, glass, timber, and properties among others.
Sainsbury also noted that most of the group’s operations in Zimbabwe particularly Sable, PG and ZFC were cash neutral but as operational challenges facing many companies in the country improve, so should their performance recover.
At least 4% of the group’s cash balances are in Zimbabwe while the remainder is outside the country. The group’s net cash balance stood at US$13,5 million with cash value per share at eight cents.
Sainsbury said increased costs placed immense pressure on margins while lesser demand for the winter cropping programme meant that budget volumes were not achieved.
“Performance of this division should improve in the second half, which represents the peak of the agricultural season,” he said. TA Holdings views the manufacture of fertilizer, as a national priority but needs to find a profitable solution.
The group noted that in Zimbabwe, tight liquidity and an ever-increasing cost base continued to cause a drag on revenues and limit margins.
“The hemorrhaging, that was a feature of the Zimbabwe operations in 2010, has largely been contained Sainsbury said.
“There is still much to do to right size these operations.” In contrast, Botswana’s stable macro-economic environment provided the platform for continued profitability growth in TA Holding’s operations.
Cash generated from operations increased by 25% from US$1,6 million in 2010 to US$2 million in 2011. The group also restructured its corporate office at a cost of US$541 000, a development which Sainsbury said should reduce overheads by up to 50%.