There is no joy yet for the ailing and loss-making Border Timbers, with the company’s judicial management having recently predicted that it was likely to remain under intensive care for the foreseeable future.
The timber producer was placed under provisional judicial management in January 2015 before going into final judicial management in April 2016.
Judicial management is essentially a method of debt restructuring, where an independent judicial manager is appointed to manage the affairs, the business of property of a company under financial distress.
While under judicial management, the company is temporarily shielded from legal proceedings by third parties, giving it the opportunity to rehabilitate.
In a trading update, nine months to 31 March 2020, Border Timbers judicial manager,Peter Lewis Bailey, said indications were that the company was not likely to come out of judicial management any time soon.
“No finalisation has yet been reached from ongoing discussions with the other party to the claim and with the government,” said Bailey.
The company remains trapped in an on-going dispute with creditors over US$125 million, awarded by the International Centre for Settlement of Investment Disputes (ICSID).
“Accordingly, the company will remain under judicial management for the foreseeable future,” explained Bailey.
However, on year to date performance, Bailey said lumber production was higher compared to the same period prior year due to the enhanced production processes at the Charter sawmill.
“Treated poles reflect a decline in production and sales volume compared to the same period prior year, this was because of lower demand during H1of FY20,” said Bailey.
“Revenue saw positive improvement compared to prior comparable period mostly driven by better average selling prices (ASP) on both lumber and poles. Loss for the year has been caused mainly by unrealised exchange losses primarily from a foreign loan, the net unrealised exchange loss amounts to ZWL68, 932 187.”
The judicial manager bemoaned the harsh economic environment, characterised by a weakening local currency and the re-emergence of hyperinflation, the company continues to operate under.
“In addition, the global economies experienced the devastating effects of COVID-19 pandemic which resulted in lockdown measures which affected both our local and export markets,” he said.
“The COVID-19 pandemic is estimated to have a material adverse effect on Zimbabwe. As a result of the nature of the pandemic and the uncertainty surrounding the duration and extent of the lockdown restrictions, the company’s future profitability cannot be presently ascertained.”
Bailey however said: “Management continues to do an excellent job in difficult circumstances.”