TA Ditches ZFC, PG

28 May 2012

TA Holdings is considering pulling out of Zimbabwe Fertiliser Company and PG Industries as the businesses are now regarded as "non-core" to group ambitions. Group financial director, Mr Bothwell Nyajeka told an Imara conference last week

the group would dispose of its shareholding in the two entities to focus on its core business.

TA controls 20 percent in Zimbabwe Stock Exchange-listed PG and 22 percent in ZFC.

"The group's interest in ZFC of 22 percent is considered no longer core to our chemical ambitions and we wish to disinvest from this company," he said.

ZFC sells 135 000 tonnes of fertiliser a year, though production is dependent on the availability of ammonium nitrate from Sable.

Capacity utilisation is about 40 percent and operations continue to be negatively impacted by the liquidity constraints.

The decision by TA to pull out of PG came after BancABC sold its 15 percent stake in the building materials company in 2010, after it displayed a number of losses.

Despite topline growth ahead of inflation, heavy interest costs continue to negate positive performance in many listed companies.

Imara says a classic case is that of PG, whose gearing stands at a high of 136 percent.

Several other companies remain hugely undercapitalised, hampering earnings growth and curtailing share price performance.

Mr Nyajeka said in their agro-chemicals business, a viable tariff for Sable has been finalised with Government for 2012, which should ensure that the company remains at break-even levels.

TA controls 51 percent of Sable Chemicals that has an electrolysis plant and an ammonium nitrate plant.

Mr Nyajeka said his company would move to full ammonia importation by the end of 2012 to end the company's reliance on electricity for the chemical's manufacture.

Sable currently has rolling stock/tank cars capacity to transport up to 3 000 metric tonnes of imported ammonia a month.

Mr Nyajeka said Sable would refurbish an additional 30 tank cars to increase ammonia importation capacity from 3 000 to 4 000 metric tonnes a month by the end of December 2012.

This will increase plant capacity utilisation to 40 percent by end of year -- which will result in the company breaking even.

"The company will acquire additional 50 tank cars during 2013 which will increase plant capacity utilisation to 55 percent, which will make the company profitable," said Mr Nyajeka.

Sable plans to build up ammonia imports to ensure 100 percent plant capacity utilisation in the next two years until the advent of coal gas in approximately five years.

TA has insurance and hotel business interests in Zimbabwe and Botswana.

Mr Nyajeka said all Zimbabwe insurance companies have forecast healthy increases in underwriting profits. They have also forecast underwriting profits of US$2 million in 2012.

TA reported an improved operating result to record an attributable profit of US$4,6 million from a loss of US$6,4 million for the year ended December 2011.

The turnaround was driven by strong performance from external operations and fair value adjustments.