15 June 2012

Zimbabwe: Hunyani Closes Botswana Unit

HUNYANI Holdings Limited says it has disposed of its  Botswana waste collections following the closure of the firm's paper mill which had been under care and maintenance, a clear indication that Zimbabwe's paper manufacturing industry is still far from returning to viability.

In a statement accompanying the group's half year results for the period ending April 30, 2012, company secretary Keith Nicholson said the disposal of the Botswana unit followed the closure of the firm's paper mill in Zimbabwe whose operations were depressed.

"Its (Paper Mill) contribution to profit was marginal and the full net asset value will be recovered. The proceeds on disposal will be applied to capital projects," Nicholson said.

Hunyani closed the mill, which falls under its pulp and paper division located in Norton just outside the capital, over two years ago due to viability problems.

Hunyani's pulp and paper division manufactured kraft papers for the corrugated packaging industry, envelope paper and book covers for the printing and stationery industry.

The group's board had indicated that market conditions were not conducive to re-opening of the mill and that all remaining stock was sold to mitigate recurrent costs, which had been exhausted.

Hunyani's pulp and paper division was initially established as a paper source for the group's corrugated products division but had grown to be the largest paper and fluting mill in Zimbabwe, with a capacity of 150 tonnes of paper per day before giving in to an unprecedented economic crisis in the country.

During the period under review the group's revenues was six percent up to US$22,2 million compared to US$20,9 million during the same period last year.

A profit after tax of US$435 854 was achieved during the interim period.

Nicholson said volume efficiencies at the company's division, Corrugated Products, were badly affected by unacceptable high levels of power cuts.

"The implementation of the capital projects will result in improved efficiencies, particularly the generator at Corrugated Products.

Hunyani intends to continue developing export markets and seasonally.

Agriculture and commercial volumes will improve in the second half of the year," he said.

Nicholson said liquidity challenges faced by customers and persistent power cuts affected demand for packaging negatively.

"Commercial market volumes did not reach forecast levels, while tobacco volumes were lower due to a smaller crop size. The focus on increasing exports resulted in export volumes improving significantly," said Nicholson.

During the period under review Flexible Products volumes were below forecasts and the grain milling industry was experiencing problems with low-cost substitutes affecting viability.

"Several customers are facing serious cashflow difficulties. At Printopak, the division continued its recovery, with volumes increasing significantly while overheads were well controlled. Softex achieved improved sales, but margins were lower due to an influx in competitors," he said.

Hunyani Holdings, incorporated in Zimbabwe in 1951, and listed on the Zimbabwe Stock Exchange in 1952, has, for too long, been a financially secure company in which Nampak South Africa is heavily invested.

A manufacture of a wide range of packaging products at specialist operations situated throughout Zimbabwe, the group's diverse range of products includes folding and corrugated cartons, flexible packaging, sacks, bags and labels.

Its major customers have included Nestle, Heinz, now a unit of AICO after the American company divested recently, Reckitt Benkiser, Levers, Colgate Palmolive and British American Tobacco, as well as numerous leading local companies, including: Crystal Candy, National Breweries and Cairns.

Others among this list of blue chip companies have relocated to South Africa, and the rest are still smarting from a decade-old economic crisis between 2000 and 2009 and are yet to boost capacity utilisation to meaningful levels.

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