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PG Industries in funding dilemma


PG Industries Zimbabwe Limited says it will be engaging stakeholders on how to raise the $10 million that it requires to fund the group’s capital projects, whose total cost is estimated at about $15 million, replenish stocks and retire short-term expensive debts.

In the first quarter of the year, the construction and allied industries conglomerate borrowed $4,5 million short-term loans at an interest rate as high as 22%.

Through the interest obligations, PG’s total debts have since ballooned to $6,6 million.

First-half borrowings were committed to Phase I of the projects, which entailed the resuscitation glass, board and concrete operations.

“We will be consulting shareholders on how we will be raising the money,” Hilary Munyati, PG group CEO, said. “We have a number of options but we still haven’t submitted them to shareholders.”

But PG’s options are limited. It cannot dare short-term debts anymore. Cheaper long-term debts facilities are not available.

This leaves them with the option of either a rights issue or private placement, which would dilute current shareholders.

PG is banking entirely on the planned recapitalsation projects to boost capacity utilisation every one of its four business units.

Munyati is upbeat the group will be realising the benefits of the $4,5 million debt incurred in the first quarter of 2010, which had boosted working capital for the group’s units.

He said group turnover is expected to surge by 60% for all business units in the third quarter.

“PG Safety Glass capacity utilisation is expected to increase to 38% in the third quarter of the year from the current 32%. ZimTile is at 60% capacity utilisation and is expected to increase in this third quarter,” said Munyati.

The merchandise division is expected to break even in the third quarter of the year as sales and liquidity conditions at the company improve.

Munyati said in the first quarter of the year there were no significant deliveries from South Africa, for raw material for the group’s glass operations and they were hoping they would be having increased output this third quarter.

PG Industries Manica Boards and Doors that has been operating at 13% capacity is expected to increase after the refurbishments that have been going on at the plant in June and July.

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