The Sunday Mail
ASBESTOS products manufacturer, Turnall Holdings, is pinning its hopes on continued revival on the acquisition of its US$7,2 million bank debts by the Zimbabwe Asset Management Company (Zamco).
Under the deal, Zamco has also agreed to restructure the short-term debt to medium-term debt, repayable over six years at an interest rate of 10 percent per annum.
Zamco is a special purpose vehicle created by the Reserve Bank of Zimbabwe (RBZ) to hive off debts and free their balance sheets.
This seeks to make the firms more attractive to potential investors.
Turnall, which has previously been enmeshed in reports of rampant corruption and asset stripping involving previous management, believes Zamco will help it cut down its borrowing costs.
Last year alone, Turnall paid bank penalties and interest costs of US$500 000.
Turnall’s new managing director, Ms Roseline Chisveto — who was appointed effective March 1, 2018 — told The Sunday Mail Business in e-mailed responses that the company is now poised for growth.
She said Turnall is presently stable, with a sound business model, and has embarked on a culture change programme focused on building teamwork and sticking to good corporate governance practices.
“The company’s turnaround strategy has already started and it is underpinned by management’s commitment to rebuild key business pillars to ensure survival in the prevailing turbulent environment.
“The company’s corporate strategy is mainly focused on consolidating current operations for sustainable growth. Focus is primarily on financial growth, exports growth and human capital development, customer centricity, operational excellence, research and innovation,” said Ms Chisveto.
Ms Chisveto had been acting managing director since 2016 following the sacking of Mr Caleb Musodza and former finance director Mr Kenias Horonga.
For the year to December 31, 2017, Turnall contained a three-year plunge in turnover, which jumped 12 percent to US$19,026 million due to an increase in sales volumes and production.
Sales volumes increased by 9 percent on the prior year, largely due to a jump in production levels, which surged by 32 percent following improved working capital management and raw materials availability.
Crucially, Turnall’s gross profit was US$6,8 million in the period under review, compared to US$1,9 million in the prior year.
The performance was mainly attributed to technological innovation, cost containment, procurement efficiencies and increased capacity utilisation.
Recapitalisation of the firm
In October last year, Turnall was reportedly seeking upwards of US$4 million for working capital to turnaround the company’s fortunes.
However, Ms Chisveto could not be drawn into revealing how much the company requires to recapitalise its operations.
She conceded that most manufacturing companies have been affected by outdated technology, antiquated equipment, working capital challenges and cash-flow limitations.
“Financing options for the company’s turnaround strategy will address key capex requirements for improved production outputs,” said Ms Chisveto.
She believes the Zamco deal, in which Turnall’s US$7,2 million bank debts are being taken over, is central in transforming Turnall’s operations.
“This arrangement is expected to reduce both the cost of Turnall’s borrowings and remove the bulk of the bank penalty and interest costs which totalled US$0,5 million in 2017,” said Ms Chisveto.
Ever since she became acting MD, Ms Chisveto said some of her major achievements at the company include a 32 percent improvement in production, a 12 percent rise in sales volumes, debt restructuring, improved customer relationships, improved cash flows, cost reduction, procurement efficiencies, improved plant capacity utilisation and critically, bringing the business back to operating profit.
Ms Chisveto believes she could have done even better were it not for various other challenges that include shortages of foreign currency, cash and working capital, which have limited importation of raw materials and spares.
Turnall’s focus in the medium to long-term is to revive production at its Harare plant, riding on an improvement in economic fortunes since the coming in of President Mnangagwa.
Currently, the Harare AC plant is on care and maintenance while the company has already invested in new technology which has seen it producing non-asbestos products at its Bulawayo factory.
At the moment, Turnall’s AC pipes are available and are being sold municipalities and councils.
Turnall’s key recent projects include the 4km Nyamandlovu Water Pipeline.
The re-opening of the Shabani-Mashava Mines processing plant in Zvishavane is also expected to help the company to source raw materials locally, improve supply logistics and reduce the import bill.
Ms Chisveto said the processing of chrysotile fibre from Shabani-Mashava Mines has commenced and Turnall is ready to immediately procure the much-needed raw materials.
Currently, Turnall is sourcing its chrysotile fibre from Russia and has been getting support from the RBZ.
Expectations are also high that Turnall will start generating more foreign currency since it has commenced regional exports.
This is expected to capacitate the business’ ability to pay for its imports.