Directors: P M Matupire (Chairman), *R K Zirobwa (Group Chief Executive), *N Dube, L W Tapera, *T Makombe, N N Moyo, O Mtasa, K Naik (*EXECUTIVE)
2012 2011 2012 2011 2012 2011
Short term borrowings 6 500 3 542 568 4 449 7 068 7 991
Long term borrowings 1 587 - - - 1 587 -
Lease hire 1 000 1 000 - - 1 000 1 000
9 087 4 542 568 4 449 9 655 8 991
9. Capital commitments
USD 000’s 2012 2011
Authorised capital expenditure 894 950
Revenue 34 069 30 102
Cost of sales (22 693 ) (20 557 )
Gross profit 11 376 9 545
Other income 17 28
Operating expenses (9 051 ) (9 323 )
Operating loss before fair value
adjustments and impairments 2 342 250
Impairment of assets (44) (100 )
Fair value adjustments on biological assets 333 514
Operating profit/(loss) before interest and taxation 2 631 664
Finance income 27 58
Finance costs (2 048 ) (949 )
Profit/(loss) before tax 610 (227 )
Taxation (136 ) (27 )
Profit/(loss) for the year from continuing operations 474 (254 )
Loss after tax from discontinued operations (41 ) (2 644 )
Profit/(loss) for the year 433 (2 898 )
OTHER COMPREHENSIVE INCOME
Translation of foreign subsidiaries 143 (180 )
Surplus on revaluation of property
plant and equipment (net of tax) 108 357
Impairment of property plant and equipment (net of tax) (241 ) (57 )
Fair value adjustment on available
for sale investments (net of tax) 18 (7 )
Other comprehensive income for the year net of tax 28 113
Total comprehensive income/ (loss) for the year 461 (2 785 )
Earnings per share (cents)
Basic earnings/(loss) per share from continuing operations 0.10 (0.05 )
Basic loss per share from discontinued operations (0.01 ) (0.57 )
Basic earnings/(loss) per share 0.09 (0.62 )
Diluted earnings/(loss) per share from
continuing operations 0.10 (0.05 )
Diluted loss per share from discontinued operations (0.01 ) (0.57 )
Diluted earnings/(loss) per share 0.09 (0.62 )
Group Statement of Comprehensive Income
Property, plant and equipment 10 402 12 057
Biological assets 3 906 3 360
Investments 28 4
Deferred tax assets 3 214 1 817
Other non-current financial assets 35 68
Total non-current assets 17 585 17 306
Inventories 6 067 4 904
Trade and other receivables 3 947 3 490
Cash and cash equivalents 554 761
10 568 9 155
Assets of disposal group classified as held for sale 3 519 4 285
TOTAL ASSETS 31 672 30 746
EQUITY AND LIABILITIES
Capital and reserves
Share capital 47 47
Share premium 4 378 4 378
Retained loss (6 853 ) (7 286 )
Non distributable reserves 13 052 13 024
Shareholders’ equity 10 624 10 163
Long term borrowings 1 587 -
Finance lease liability 1 000 1 000
Deferred tax 4 441 4 540
Total non-current liabilities 7 028 5 540
Trade and other payables 5 403 4 088
Provisions 604 720
Tax payable 411 255
Short-term borrowings 6 500 3 542
Bank overdrafts 89 -
Total current liabilities 13 007 8 605
Liabilities directly associated with the assets of
disposal group classified as held for sale of
disposal group classified as held for sale 1 013 6 438
14 020 15 043
Total liabilities 21 048 20 583
TOTAL EQUITY AND LIABILITIES 31 672 30 746
Group Statement of Financial Position
Group Statement of Cash Flows
At 1 October 2010 47 4 378 12 911 (4 388) 12 948
Loss for the period - - - (2 898) (2 898)
Other comprehensive income - - 113 - 113
Total comprehensive income/(loss) - - 113 (2 898) (2 785)
At 30 September 2011 47 4 378 13 024 7 286) (10 163
Profit for the period - - - 433 433
Other comprehensive income - - 28 - 28
Total comprehensive income - - 28 433 461
At 30 September 2012 47 4 378 13 052 (6 853) 10 624
Group Statement of Changes
in Equity Total
External customer 11 993 20 610 1 452 14 - - 34 069
Inter-segment 1 638 6 737 - - - (8 375) -
13 631 27 347 1 452 14 - (8 375) 34 069
Operating profit before impairments
and fair value adjustments 175 1 645 567 (45) 90 - 2 432
Segment assets 9 723 10 580 5 047 499 2 587 - 28 436
Segment liabilities 3 528 5 524 138 6 401 1 013 1 208 17 812
Capital expenditure 187 375 23 1 - - 586
Depreciation 427 347 88 50 6 - 918
Group Segment Result
1. Basis of preparation
The consolidated financial statements have been prepared on a historic cost basis, except for land and
buildings, financial assets and biological assets that have been measured at fair value.
2. Currency of reporting
The financial statements are presented in United States Dollars (USD).
3. Statement of accounting policy
The accounting policies adopted in the preparation of the 2011 annual financial statements have been
followed consistently in the preparation of these financial statements.
4. Statement of compliance
The Group’s financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the International Financial Reporting Interpretations Committee, (IFRIC)
5. Audit opinion
The Group auditors Ernst Young have issued an unqualified opinion with an Emphasis of Matter on
going concern on the Group financial statements. The signed audit opinion is available for inspection at
the Company’s registered office.
6. Results of assets held for sale and discontinued operations
In compliance with the requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, the assets and liabilities of the discontinued operations amounting to US$3,519million and
US$1,013million have been included in Group statement of financial position as “assets of disposal
group classified as held for sale” and as “liabilities associated with the assets of disposal group classified
as held for sale” respectively.
7. Events after reporting date
In October 2012, a fire broke out at the timber plantations and destroyed 150 hectares of timber valued
at $100,000.The loss will be accounted for in the results for the year ended September 2013. There will
be no significant immediate impact on the Group’s cash flows as a result of the loss.
8. Total borrowings split
The Group posted improved results for the year ended 30 September 2012 with a profit being recorded for
the first time since dollarisation.
Revenue at US$34 million increased by 13% when compared with prior year while operating profit increased
by 837% to US$2.3 million. The Group is now beginning to benefit from the restructuring work carried out
over the prior years. In addition, results of cost control initiatives that have been implemented throughout
the Group are also filtering into the business.
Margins at 33% (2011: 27%) have been supported by the positive turnaround of the Chloride factory which
recorded a 36% increase in production volumes. Additionally, the business benefited from the elimination
of the negative margins in the stationery business which was closed last year as part of the restructuring
exercise. Contribution from the paper business was however lower than last year as margins came under
significant pressure from competition with prices of tissue reducing by 15% in the second half of the year.
The Group recorded profit after tax of US$433,000 after charging interest of US$2.1 million. Debt levels
remained high, increasing from US$8.991million last year to US$9.656million. Efforts to reduce the cost
of debt were not successful as debt levels increased in response to working capital demand. The Board is
aware of the need to find a lasting solution to this challenge as the current position is now holding back
the profitability of the Group.
As a result of the improved profitability, cash generated from operations at US$1.3 million was relatively
higher than the US$497,000 recorded in prior year. Capital expenditure incurred of US$586,000 was lower
than prior year as most of the cash generated was channelled towards payment of interest.
Turnover for the batteries division grew by 14% while gross margin increased to 40% from 35% in 2011 and
resultantly, profit before tax increased by US$1.8million when compared to a loss of US$560,000 recorded
The strategies implemented in the latter part of 2011 for the turnaround of the Chloride battery factory
have begun to bear fruit, with the factory returning to profitability for the first time in three years. The
factory recorded an increase in capacity utilization from 48% in 2011 to 65%.This was achieved on the back
of investment in factory equipment, and working capital. US$212,000 was invested in factory equipment,
mainly to address factory bottlenecks and efficiencies.
The lead furnace came into full production in the year, thus providing the intended benefits of raw material
security and margin protection. London Metal Exchange lead prices firmed in the year, rising from US$1,900
at the beginning of the year to US$2,300 in September 2012.
Chloride Zambia volumes grew by 10%, with a resultant turnover increase of 11%. However, profitability
declined by 10% as margins came under pressure from competing products. Exide has however remained
the dominant brand in the market, recording an increase in market share in the year. With a strong battery
brand, this business is still well positioned to compete effectively in the growing Zambia market.
The Zimbabwe distribution unit – Battery Express recorded growth of 13% in automotive volumes.
Additionally, the business traded in solar products through a distributor agreement with Sukum of India.
As a result, and despite intense market competition, margins improved resulting in the business recording
earnings at levels twice that recorded in 2011. The Exide brand maintained its pole position, recording an
increase in market share in the year.
Paper and Stationery Division
The paper and stationery division performed below expectation in the year. Although turnover grew by 8%,
a loss of US$268,000 was recorded compared to a loss of US$144,000 in 2011. Capacity utilization grew
marginally from 60% in 2011 to 63%, while margins reduced to 24% from 27% in 2011.
National Waste traded profitably with volumes increasing by 11%. In addition to supplying the Kadoma
Tissue Mill, excess kraft volume was exported to paper mills in South Africa. The unit was however unable to
supply the Kadoma Tissue Mill with adequate waste for tissue production due to the low printing activity in
the economy. Kadoma Tissue supplemented the deficit by imported waste paper.
Kadoma Tissue’s market volumes grew marginally by 3%, while margins declined from 22% in 2011 to
16%, resulting in the business reporting an operating loss. The business was affected by increased market
competition, the devaluation of the South African Rand and an increase in the cost of raw materials
arising from imported waste paper. The future of this business is dependent on the ability to maintain its
competitive advantage from use of local waste paper. Management is reviewing options for investment in a
waste cleaning system that will increase use of local waste paper in the manufacturing process.
Although volumes in Softex Tissue grew by 20%, the business’ margin came under significant pressure
from imported and locally manufactured products, resulting in a drop in margin to 22% from 24% in
2011. Consequently the profit outturn was at the same level as 2011. Provision has been made in the 2013
budgets for retooling of the Softex factory which is expected to improve product quality and reduce cost. In
addition the market will be repositioned to increase the volume of higher margin product.
Eversharp recorded a disappointing performance with a marginal increase in turnover of 3%. The business
suffered from low factory output as a result of poor machinery performance. Although factory output
increased in the fourth quarter of the year after installation of replacement equipment, the business was
unable to recover from losses recorded earlier in the year and posted an overall loss. With the factory now
at full production capacity, the focus in the New Year will be on development of the export market as well
as enhancement of the market presence of the Luxor and Fleximail brands.
Timber sales volumes grew by 13% in the year, while turnover increased by 53%. The market for timber
remained strong while prices continued to firm in the year. Silviculture work on the estates was completed
to plan except for planting which was 85% of target due to the low rainfall in the year.
Although there was no major fire incident recorded at the estates during the year, a fire broke out at Nyagari
estates in October 2012 and destroyed 150 hectares of trees valued at US$100,000. It is expected that the
loss will be mitigated by salvage of the burnt trees.
Mutare Mill land and buildings remain earmarked for disposal. The buildings generated an operating profit of
US$90,000 from rental income after charging expenditure on improvements to the building of US$32,000.
Further improvements to the buildings will continue in the New Year in order attract buyers.
After the Group manpower rationalization in 2009 to 2011, the Board recognizes the need to invest in
the development of human capital. Through a three year Group human resources plan, Art will allocate
resources to the development of current and future skills. Additionally, an appropriate performance
measurement tool will be implemented in order to enhance accountability and motivate employees at all
levels in the organization.
There were no changes at directorate level during the year.
The company is not in a position to declare a dividend.
The current liquidity challenges in the economy are likely to persist for the greater part of the New
Year and consequently margins will continue to come under pressure. In order to protect profitability,
management will be focused on improving operational efficiencies and mitigating liquidity risk.
The Group will continue to invest in both new capital expenditure and factory refurbishment so as to
remain a relevant player in the manufacturing sector. In this regard, the Group will invest US$260,000
capital expenditure in the paper division in the coming year in order to restore competiveness throughout
the value chain.
The restructuring of the balance sheet will be our primary focus in the New Year. The initiatives, which are
at an advanced stage and are subject to the ongoing cautionary announcements, involve accessing long
term capital and injection of fresh capital to retire expensive debt. It is anticipated that the benefits of this
restructuring exercise will be realised in the second half of the year.
I would like to thank my fellow Board members, management and staff who have worked tirelessly
to get the business back to profitability. We also credit the recovery of our business to our external
partners and stakeholders whose contribution has been invaluable. While the recovery process is by
no means complete, the Board is confident that the current strategies will lead the business into a
sustainable growth phase .
4 December 2012
Registered Office Regional Office
Palm Grove House 202 Seke Road
P.O. Box 3186 Griniteside
Wickhams Cay1 P.O. Box 2777
Road Town, Tortola Harare
British Virgin Islands Zimbabwe
GROUP SECRETARY: F.D. MUKARAKATE
ABRIDGED YEAR-END AUDITED RESULTS 2012
Cash generated in operations 1 354 497
Finance income 12 22
Finance costs (2 174 ) (1 827 )
Taxation paid (140 ) (194 )
Cash utilised in operating activities (948 ) (1 502 )
CASH FLOW FROM INVESTMENT ACTIVITIES:
Purchase of property plant and equipment (586 ) (839 )
Proceeds on disposal of property plant and equipment 524 797
Cash utilised in investment activities (62) (42 )
CASH FLOW FROM FINANCING ACTIVITIES:
Additional borrowings 2 850 7 200
Repayment of borrowings (2 186 ) (5 340 )
Cash raised from financing activities 664 1 860
(Decrease)/increase in cash and cash equivalents (346 ) 316
Effect of exchange rates on cash and cash equivalents
arising from foreign subsidiaries 4 2
Cash and cash equivalents at beginning of the year 814 496
Cash and cash equivalents at the end of the year 472 814
Cash resources 561 814
Overdrafts (89 ) -
Cash and cash equivalents at the end of the year 472 814
Cash and cash equivalents
Continuing operations 464 761
Discontinued operations 8 53
Cash and cash equivalents at the end of the year 472 814