Astra shareholders seek full control

Published: 05 December 2013

MAJORITY shareholders in Zimbabwe Stock Exchange-listed paint and chemical products manufacturer, Astra Industries Limited, said last week they were planning a mandatory offer to minorities in a transaction that could see them assume full control of the business.

Astra Industries, whose pre-tax profit declined to $1,5 million during the full-year to August 31, 2013, from $1,9 million during the prior comparative period last year, as margins came under tremendous pressure from cutthroat competition and increasing costs, was one of a few manufacturing companies whose operations remained above the red line during the period.

The rest have been threatened by lack of lending facilities, high production costs, power shortages and stiff competition from imported products.

Major sources of imports have been China and South Africa, which has been pushing such products as margarine and cooking oil into Zimbabwe.

These used to be produced locally.

In the past few months, more manufacturing firms have closed in Zimbabwe, resulting in massive job losses.

It appeared Kansai Plascon Africa Limited and Hemistar Investments Private Limited, who took over a combined 63,25 percent shareholding previously controlled by the Reserve Bank of Zimbabwe (RBZ) in Astra Industries, have seen immense potential in the business and were ready to fortify their ownership of Astra.

In July, the Finance Trust of Zimbabwe, a unit of the RBZ, disposed of its controlling stake in Astra in line with the central bank's move to divest from non core activities.

The shareholder reconfiguration resulted in 32,25 percent and 25 percent of Finance Trust's stake being taken over by Palscon Africa and Hemistar respectively.

In a statement accompanying the results released last week, Astra said the major shareholders will make the mandatory offer to minorities by mid 2014.

"The mandatory offer to minorities will be made by July 18, 2014. Competition and Tariff Commission as well as final Indigenisation approvals are anticipated shortly," the statement said.

"The strategic alliance with Kansai Plascon, who now have a significant stake in the business, offers opportunities in terms of introducing the Plascon flagship products, developing export markets and operational synergies in the paints business. In addition to exploiting these opportunities, the group will continue to focus on cost containment and efficient working capital management to create value for its shareholders," said the statement.

Sales volumes grew by seven percent to $28 million during the period, from $27,1 million during the prior comparative period last year, but the firm saw most of its key indicators decline.

Operating profit declined to $1,5 million, from $2,1 million last year following a spike in selling and administrative expenses, with labour costs contributing the biggest chunk to overheads as pressure mounted from unions for industries to improve salaries in an economy where the bulk of the working class live below the poverty line.

Sales volumes for paints declined by five percent during the review period.

This was in response to the contraction in the construction industry, while volumes in the chemicals unity improved.

However, the statement said this was at reduced margins.
- fingaz

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