Harare — PG Industries says it will expand its regional operations as the diversified construction material firm anticipates low activity on the local market.

The Zimbabwe Stock Exchange largest construction material firm said the regional expansion strategy has been necessitated by the growing demand for housing in Zambia and Mozambique.

The recovery of the local construction industry had been slower, as the prospective home builders continue feeling the pinch of tight liquidity.

"As growth in the domestic market is anticipated to be slower, the group has embarked on a strategy to enter regional markets of Mozambique and Zambia where there is growing demand for housing," said the group in a statement.

PG, the supplier of timber, doors and glass said it has been granted regulatory approval to expand operations in Zambia.

"The Zambia project is at the implementation stages as regulatory approvals have been granted by both countries".

The Zambia project has been on the cards for a long time having been stalled in 2006 following reservations by the Ministry of Finance over exchange control regulations.

During the period under review, the group said regional growth efforts were directed to PG Mozambique which achieved a turnover of US$299 000.

"With improved resourcing, this market has opportunities and should prove profitable," the company said.

The company is also planning to establish regional operations in Botswana and other economies in transition in Southern Africa, where new investments in industries, residential and commercial infrastructure have fueled construction activity.

In response to the funding challenges of the first half, the company said the group has initiated a capital raising project to raise funds to finance the operations for growth.

"In the short-term, the group will continue to focus to regaining market share, improvement in service levels and strengthening win-win long term supply relationships will all key suppliers, both local and foreign," the company said.

In the first six months the group released a tepid set of results as the group turned over US$11,95 million.

PG posted an operating profit of US$171 000.

After incurring impairments on investment properties of US$1,8 million, the group posted a loss before tax of US$1,7 million and an attributable loss for the period of US$1,4 million.

Its balance sheet stood at US$28,4 million against US$33,1 million as at 31 March 2009 despite a shrinking balance sheet and loss in the period under review, they however closed the first half in a positive cash position of US$526 882.

Analysts said the group, though well positioned to maximise business in the oncoming (though not clear when) construction boom, lacks the capacity to run profitably.

Management indicated that they needed, not exhaustedly, US$10 million to recapitalise their business units as well as upgrading their old equipment.

More funds will be directed towards the merchandising division followed by concrete division, glass, board, intersegment sales and foreign operations.

PG Industries operates 11 subsidiaries in Zimbabwe which include PG Building Supplies, PG creative Paints and Glass, PG Timbers, PG Safety Glass, PG Properties, Zimtile, Johnson and Fletcher, Msasa Timbers, Manica Boards and Doors, Zimboard Distribution and DST.