Zimglass debt balloons to $26 million

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HARARE – The country’s sole packaging glass manufacturer Zimbabwe Glass Industries (Zimglass) debt has shot up to $26 million, and has applied to the High Court for provisional judicial management citing lack of capital and mismanagement, The Source has established.

In an affidavit deposited with the court dated June 18 and filed by the company’s acting managing director Gilbert Tapfuma, Zimglass said its operations had been weighed down by lack of capital compounded by debt overhang.

The debt includes $5,5 million borrowed for capital expenditure to revive operations after its shutdown in 2010 and a further $8,8 million in short-term loans from local banks which was used to rebuild the plant and refurbishments.

“This capital expenditure was not adequate to yield required returns and it was being funded from short-term (loans) resulting in further borrowings. As a result, the company’s debt position increased dramatically to approximately $26 million as at May 2014,” a copy of the affidavit seen by The Source on Friday reads.

“Applicant company is unable to pay its debts due to mismanagement of the business.”

In the affidavit, Tapfuma said the company was now embarking on a long-term capital-raising process to refinance its short-term debt.

He said following the rebuilding of the furnace, the company started having problems in sourcing raw materials that were not locally available.

The company, he said was undercapitalised and instead of management maximising production, production efficiencies were allowed to remain in the range of 40% to 55% when the business model required such efficiencies to be in the range of 85% to 95% to enable it to make profit.

“As a result of the management challenges, there is now distrust between creditors and current management, such that the situation cannot engender normal business relations,” he said.

“. . . the company is unable to pay debts and is prevented from becoming a successful concern.”

Tapfuma, however, said under judicial management, the company would be able to pay its debts and become a successful concern with the ability to immediately raise $3,5 million working capital by selling used glass to a Tanzanian company. “This amount can be used to buy the required raw materials to start production,” he said. “The company has secured orders with bottling companies which translates into revenue.”

The company, which has since been sued by some of its creditors — Fawcett Securities, Hunyani Paper and Packaging as well as City Plastic Industries — is also seeking the court’s protection from sale of its assets.

“A forced sell will only result in specialised glass making equipment being sold as scrap metal to tin makers,” he said.

Zimglass manufactures glass packaging material for alcoholic beverages, sparkling beverages, food, liquor/wines and pharmaceutical segments. Its major domestic customers include Delta Beverages, African Distillers, Mutare Bottling Company, Straitia Investments, Olivine Industries, Datlabs and E Snell and Company.

— The Source