Turnall on the brink of bankruptcy!

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Golden Sibanda
Roofing and piping products manufacturer, Turnall Holdings, has approached the Reserve Bank of Zimbabwe seeking a $10 million bailout package it requires to retire toxic debt. Turnall is saddled by a $15 million debt, which is now affecting viability and nearly drove the company into seeking voluntary de-listing from the Zimbabwe Stock Exchange amid going concern uncertainties.

However, Business Weekly understands that the rescue facility may only be secured if Turnall demonstrates realistic chances of maintaining profitability, which it achieved sometime last year after cutting workers’ salaries.

The salaries were trimmed by 50 percent and enabled the firm to save $140 000 per month.

While the slashing of employees’ salaries has reportedly returned the firm to profitability, the move has ignited a bitter labour dispute.

Turnall’s salvation now lies in an unlikely favourable determination from the company’s National Employment Council, which is mediating the abrasive dispute with workers.

Interestingly, Turnall’s unpopular cost-cutting measure has yielded positive results amid indications it started to break even around mid-last year.

Turnall management is aware that reversing the cuts would inevitably see the company relapsing into the red.

With a labour force of 214 at both plants in Harare and Bulawayo, Turnall is yet to declare a dividend to shareholders in the last five years.

In 2016, the company posted after tax loss of $4,1 million from a profit of $106 000 in the same period of 2015.Total revenue for the period to December 2016, fell 41 percent to $16,9 million from $29 million in the prior year.

Deloitte had already rung the alarm bells when Turnall Holdings’ debts outstripped its assets by $14,8 million in 2015, suggesting the firm was technically insolvent. And as the solvency issues persisted, the excess of liabilities over assets came off marginally to $10,9 million in 2016.

Chairperson Rita Likukuma, who is also RBZ deputy board chairperson, told Turnall workers during a tempestuous closed door meeting that she went out of her way to convince RBZ Governor Dr John Mangudya that the firm had potential to turnaround, but urgently needed fresh funding to expunge high interest loans to enhance viability.

Once a clear turnaround plan has been presented to the RBZ, its special purpose vehicle – the Zimbabwe Asset Management Company (Zamco) – would then take-over Turnall’s $15 million debt liability.

The central bank would then facilitate a $10 million low interest loan facility possibly to be repaid over a reasonable period of time to allow the company to attain sustainable viability.

But labour experts says Turnall’s biggest obstacle now is the fact that it has between slim and no chance of winning the labour dispute at the NEC given it blatantly and unilaterally slashed the workers’ salaries.

It is understood that the salary cuts were effected “because at that point there was no other way”; Turnall management would have gone to the ZSE to inform them that they were going to delist and eventually close.

Prior to the salary cuts, Likukuma said she had directed Turnall’s executive to borrow notes from the Central Mechanical and Equipment Department (CMED).

“I told them to talk to CMED. They lost money, but they did not stop things.

“(So) I said go and learn from them,” Likukuma said.

CMED lost $3,5 million to fraud allegedly committed by some executives, but it climbed out of the setback.

Highly placed sources said that Likukuma told the restive workers at the company’s Harare plant that if the NEC ordered the company to reinstate full salaries, Turnall would immediately plunge back into a loss making position.

Further, she reportedly told the workers on Monday this week that the company would barely be able to sustain operations for a few months.

Similarly, Likukuma said in terms of some of the drastic survival measures Turnall also asked its suppliers to cut prices by as much as 32 percent to reduce costs.

The firm reportedly had to sever ties with suppliers who could not afford to reduce prices.

Turnall owes creditors $29 million, made up of both current and non-current liabilities, a financial situation that has compromised the tiles, asbestos and pipe manufacturing entity’s ability to secure fresh capital.

“We met suppliers and said we cannot buy at this or that price so that the company can survive,” she said.

“If the company cannot be viable, we have to agree and tell the Stock Exchange that the company is not viable. We get things from suppliers (on credit) and as a listed company if we cannot breakeven we have to tell the ZSE, those are the rules,” she reportedly said.

“If a company is making losses and has problems with suppliers and workers, the normal thing is that it must close shop…if (Turnall) keeps making losses it will be up to shareholders to decide whether we should close or keep the company going.”

According to Likukuma if the situation at Turnall continues to deteriorate, “the ZSE will descend on this company. Do not get the impression that the situation we are facing is easy, the economic fundamentals are not right,” Likukuma is said to have told the irate workers.

Despite the chilling warning, workers still largely insisted that they wanted the salary cuts reversed arguing most of them earned very little and were already battling to eke out a decent living.

The workers, who accused management of being inept, claimed they had been made sacrificial lambs yet management lived large, as evidenced by housing loans and posh cars the company bought them while they struggle to make ends-meet.

Turnall’s management insist the painful cost cutting measures are meant to give the company breathing space and allow it to latitude to regain its footing.

Likukuma stressed that Turnall’s problems stemmed from the difficult economic environment, which started negatively impacting on its viability after dollarisation in 2009.

Dollarisation saw Turnall changing its suppliers. The top 10 suppliers were not around five years ago while the previous ones closed shop between 2008 and 20.

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