HUNYANI Holdings Ltd will this year invest US$3,1 million in capital projects as part of a rationalisation and restructuring exercise aimed at improving group profitability,Finance Director (FD) Francis Dzingirai said.
He told businessdigest this week that his company would invest in generators and a case maker at its Corrugated Products and Printopak divisions by financial year end 2012.
The investment in generators was set to deal with high incidents of power cuts which, coupled with competition in the six months ended March 31 2012, seriously affected production volumes and depressed margins in both divisions.
Dzingirai said the capital projects would be financed from borrowings, internal cash flows and sale of non-core assets. Plans to dispose of Hunyani's Botswana waste collection business were in the pipeline and proceeds from the sale of the business would also finance capital projects. The Botswana business was no longer core to group business following the closure of its paper mill.
In a statement accompanying the company's financial results, company secretary Keith Nicholson said the group would continue to develop export markets and improve its agriculture and commercial volumes as part of a restructuring exercise to improve profits.
Group revenue grew by 6% to US$22,2 million, up from US$20,9 million the prior year. Operating profit went up 21% to US$912 367, up from US$756 488 recorded last year. Hunyani's earnings per share grew by 11% to 0, 10 cents.
Growth was helped by an 11% reduction in finance costs, which dropped to US$287 128 from US$338 218 recorded in the comparative period last year. Short term borrowings jumped to US$9,2 million, up from US$7,4 million recorded in the previous year.
Capital expenditure for the period amounted to US$554 000, inclusive of payments for the Corrugated Products generator and deposits for the casemaker, which were part of the group capital projects.
The company said production volumes and efficiencies at Corrugated Products, in the period were badly affected by erratic power cuts and a competitive market, which depressed margins. Flexible products volumes were below forecast, while the Printopak division volumes continued on a growth trajectory.
The company said its Softex division achieved improved sales. However, margins were low due to an influx of competitors. Liquidity challenges continue to impact negatively on operations, however, the company said its order book was fair.