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MASIMBA Holdings will unbundle its plastic manufacturing division into a standalone and thereafter list it on Zimbabwe Stock Exchange in an effort to unlock value for shareholders .

Proplastics will become an independent company with its own management and board once the unbundling process has been consummated, but no timelines have been given yet.

Chief executive Mr Canada Malunga told an analyst briefing on Friday that the move would cater for the two’s different capital requirements and tastes of investors.

The decision to unbundle the businesses also came after the realisation that synergies that existed between the two had diminished since dollarisation of the economy in 2009.

“The intention (now) is to get Proplastics unbundled from Masimba Holdings and to make it a standalone entity to be listed on the (Zimbabwe) Stock Exchange,” Mr Malunga said.

Masimba Holdings will concentrate on the engineering and construction business while Proplastics will specialise on the manufacture of different types of plastic piping products.

Proplastics is a leading supplier of world class plastic pipe systems for water and sewer reticulation to Southern Africa.

The company is registered and domiciled in Zimbabwe.

Mr Malunga said directors said this deliberate decision to unbundle the operations will give the two businesses better focus to extract significant value from their separation.

He said documentation for listing of Proplastics was already with the ZSE’s listings committee while work to get approvals from Securities Exchange Commission was aanced.

Mr Malunga said performance of Proplastics over the last 2-3 years had been g with the business achieving good margins, EBITDA and cashflows for a manufacturer.

The unbundling will be effected through a dividend in specie.

“The ZSE listings committee has started looking at the draft document (while) the Securities and Exchanges Commission of Zimbabwe is in the final stage of approvals,” Mr Malunga said.

Mr Malunga said Masimba Holdings’ board had considered the idea and was firmly convinced that considerable value for shareholders would be unlocked from the unbundling.

Directors believe that the separation will make it easier to attract capital for the separate growth profiles and enable them to strategically position themselves in their core businesses.

In his statement accompanying group results for the year to December 2014, chairman Greg Sebbom said that Proplastics had identified regional growth opportunities.

These involve growth alliances, which directors believe will be easier to execute in a standalone entity while civil engineering and contracting will be more focused and competitive.

Demand for Proplastics is seen remaining firm driven by urban sanitation rehabilitation programmes, irrigation and agriculture and buoyant housing developments.

Proplastics recently invested significantly in plant modernisation, having commissioned a new plant last November while another will be commissioned in May.

This comes as Masimba is in the process of consummating a joint venture with Kosto Holdings, incorporated in Mauritius, to establish reinforcement steel cutting and bending firm.

Kosto is part of the Reinforced Steel Contractors group of South Africa and the new entity will trade under the RSC flagship, the region and SA’s leading manufacturer of reinforced steel.

Expectations are that the joint venture will be able to enjoy significant forward linkages with Masimba Construction and also exploit opportunities in the informal sector.

Meanwhile, group revenue declined to $28 million from $35,7 million.

The manufacturing business accounted for 47 percent of total revenue while contracting chipped in with the balance although both contributed equally on gross profit.

Gross profit came in at $5,2 million with improved outturn in the second half of the year due to management initiatives to improve on cost efficiencies, now paying dividends.

Both construction and manufacturing registered improvement from last year.

The group’s earnings before interest, taxation, depreciation and amortisation came in at $1,7 million, representing a 6 percent growth compared to the same period last year.

Volumes closed off at 3,933 tonnes versus 4,053 tonnes. Revenue growth was slowed by fire at the Ardbennie factory in October 2014, liquidity crunch and credit risk.

Improved operating efficiencies in contracting business second half of the financial year saw gross profit percentage improving from 16 percent to 18 percent at year end.

Contracting gross profit percentage improved mainly due cost containment and improved productivity while manufacturing GP registered marginal growth from 20 to 21 percent.

Contracting business tendering margins continue to be below 10 percent.

The group closed the year with g balance sheet and sustainable level of borrowings following significant reduction of $2,066,665 financed through collection of Government debt.

The balance of the debt was reduced to $3,4 million (2013 : $6,4 million) while the group’s capital expenditure to increase capacity in manufacturing unit was $1,1 million.

Source : The Herald

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