The Sunday Mail
Business Reporter
LISTED engineering firm Zeco Holdings continues to bleed as its market capitalisation, which measures how investors value a company, has since declined from US$1,4 million (ZW$101 trillion using the Old Mutual Implied Rate) in February 2008 to the current US$46 000.
A company’s market capitalisation is calculated by multiplying its share price with the number of ordinary shares in issue.
Zeco’s share price has been stuck at US0,01 cents for the past 12 months.
Also, only US$500 worth of shares changed hands last year.
Much of the former engineering giant’s woes are mainly attributed to the inactivity in the steel manufacturing industry, including the challenges that are currently being experienced by two key parastatals – the National Railways of Zimbabwe (NRZ) and New Zim Steel (former Ziscosteel). Zeco Holdings Ltd chief executive Mr Harold Madziwa said the company is surviving on small contracts from non-core, non-capital intensive activities.
“The economy has been bad; our major clients have been the NRZ and Ziscosteel. We all know what is happening to these two entities. Our other major client is Government.
“In this environment it is difficult to seek financing from banks because they do not want to deal with a sector whose production is falling, nobody would want to touch such a sector except for Government, and if they do not do anything, then we are down,” said Mr Madziwa.
Zeco, whose operations began in 1964, used to manufacture heavy industrial equipment and machinery for the NRZ, Ziscosteel and Hwange Colliery Company.
However, Ziscosteel shut down a few years ago and the NRZ, which is presently looking for US$2 billion to revamp operations, has hit hard times.
Mr Madziwa noted that Zeco will pursue other funding means outside the option of a rights issue as it fears that either existing shareholders may not follow their rights or no one may risk underwriting the cash call. The company’s fortunes, however, do not compare to the fortunes of the major shareholder, Dr Philip Chiyangwa, who recently splashed more than US$900 000 on new cars.
Dr Chiyangwa, who is also chairman of the industrial concern, holds a 65 percent stake in Zeco Holdings through Native Africa Investments Ltd.
He sold 17 percent of his original 82 percent stake during the 2008 Initial Public Offer (IPO).
Dr Chiyangwa told The Sunday Mail Business last week the onus of recapitalising the business was not his as the firm can pursue several initiatives to raise funds.
“Zeco has more than 4 000 shareholders and you cannot follow only one shareholder just because he is famous. I invest (my) money where I want. Zeco can raise funds through other means like rights issue. I am not the one running Zeco, talk to Madziwa (CEO), who is running it,” he said.
Zeco has reported cumulative net losses of over US$7 million since 2012 as demand for its heavy industrial equipment and machinery has retreated.
Since 2008, there hasn’t been any return on investment to Zeco shareholders.
Market watchers say the engineering firm must consider delisting because it has failed to unlock shareholder value or raise capital, two major reasons for going public.
Statistics from the Confederation of Zimbabwe Industries (CZI) show that local industrial capacity has tumbled to 36,3 percent last year from 57 percent in 2010.
In 2013 the Institute of Chartered Accountants Zimbabwe (ICAZ) ranked Zeco Holdings Ltd as the worst managed company in the country, with a high CEO and board member turnover.
The firm does not hold regular AGMs, ICAZ said, and its earnings are released late, contrary to ZSE listing rules.
For the half year ended June 30, 2014, Zeco posted total revenue of US$260 000 and an operating loss of US$1,1 million.
The company posted US$605,000 revenue for the year ended December 31, 2013 and US$4,7 million loss for the year.
Basic loss per share was US1,02c.
In the half year to June 2012, the company posted a loss for the period of US$716 000 and a full-year loss of US$2,6 million. Established in 1964, Zeco was critical to the manufacturing industry, building rail wagons and locomotives for utilities in Zimbabwe, Zambia, Tanzania, Ethiopia, Mozambique and Kenya.
