RioZim Turns the corner

by Golden Sibanda Senior Business Reporter (Herald)

RESOURCE firm RioZim Limited appears to have turned the corner after a solid financial performance in the first quarter of 2013. A trade update released by management at the firm’s annual general meeting in Harare last week shows RioZim is consolidating

gains that started rolling in over the better part of 2012. The firm that teetered on the brink of liquidation last year has suddenly found a new lease of life under new chief executive Mr Ashton Ndlovu, who took over as CEO in April last year.

“RioZim will soon return to its rightful place as one of this country’s blue chip institutions, supporting employment and growth,” Mr Ndlovu said.

RioZim saw revenue grow 43 percent to US$22,6 million in this year’s first quarter.

Earnings before interest, tax, depreciation and amortisation jumped 124 percent to US$518 000 while operating profit grew by 117 percent to US$390 000. Hitherto, RioZim had seen turnover jumping 33 percent to US$72,3 million while earnings before interest, tax, depreciation and amortisation skipped 317 percent to US$6,9 million in 2012.

“Full year turnover grew by 33 percent. The growth was accelerated in the second half where a turnover growth of 69 percent was achieved in comparison to the same period last year. ENR revenue for the year grew by 40 percent over the same period last year due to the sale of own metals (as opposed to) toll manufacturing,” Mr Ndlovu said at the AGM.

Operating profit jumped by a staggering 415 percent to US$4,6 million while net loss declined 48 percent to 7,4 million.

Things are certainly looking up for a firm that, only 12 months ago, was choking under a US$90 million debt with US$60 million of this owed to banks, as the threat of liquidation hovered above.

Short-term bank debt has since decreased by 24 percent due to repayments and restructuring of short-term debt to long-term liability. The gearing ratio improved by 37 percent in 2012. Against the odds posed by the prevailing liquidity crisis, RioZim successfully raised US$11,6 million through a rights issue and private placement.

However, capital constraints remain the firm’s biggest hurdle on planned projects due to the fact new foreign shareholders, GEM Raintree, at the moment cannot commit equity capital without breaching the Indigenisation and Economic Empowerment Act, a poser management is grappling to find a solution. Government has since been engaged on this.

As further evidence of changing fortunes RioZim has managed to commit slightly over US$28 million towards settling its principal loan and interest obligations to financial institutions.

And RioZim directors have noted the progress achieved thus far and will test their resolve this year against more ambitious targets.

This year RioZim expects to ramp up gold production by 5,2 percent to 715 kilogrammes, nickel output is seen 1 209 percent up at 3 789kg while copper is expected to jump 421 percent to 4 723kg.

Corporate restructuring, which is only part of several strategic initiatives lined up by the group for 2013, is gathering speed with completion expected in the second quarter of the year.

RioZim will hold a majority stake in the 5 new entities (Rio Gold, Rio Base Metals, Rio Diamonds, Rio Energy and Rio Chrome) whilst utilising the remaining 49 perecnt shareholding to raise capital, acquire assets and or source expertise.