eBusiness Weekly
Oliver Kazunga
BORDER Timbers Limited’s going concern status faces uncertainty as negotiations with the Government over the US$125 million settlement to the company are still to be finalised.
The company exited judicial management last year after reaching a consensus with a major shareholder, VP Claimants, over the allotment of final awards compensating it for the loss suffered when part of its land was acquired by the Government for resettlement.
The milling and timber manufacturing concern was placed under judicial management in January 2015 and went into final judicial management in April 2016 after failing to service debts to several financial institutions.
Border Timbers’ judicial management exit was largely dependent on the settlement of a dispute with creditors over US$125 million awarded to the company by the International Centre for Settlement of Investment Disputes (ICSID).
According to an independent auditor’s report to Border Timbers’ shareholders accompanying the firm’s 2022 annual report, pending discussions over US$125 million settlement among other issues, this cast “significant” doubt on the company’s ability to sustain a going concern status.
“We draw attention to Note 32 in the inflation adjusted financial statements, pertaining to the Company’s award by the ICSID Arbitration Tribunal in the matter of the expropriation by the Government of Zimbabwe.
“These events or conditions, along with other matters …, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern.
“Our opinion is not modified in respect of this matter,” said Deloitte & Touche in the audit report.
In January last year, Border Timbers announced that it had been agreed that in respect of the compensation, 57,5 percent to the company while 42,5 percent was for VP Claimants.
In the annual report for the year under review, Border Timbers chairman Elias Hwenga said:
“No finalisation has yet been reached from ongoing negotiations with the Government of Zimbabwe on the settlement of the Border Timbers award.
“The company has recently initiated discussions with the Government on the settlement structure and timing of the ICSID award. In the meantime, operations on the ground have continued smoothly.”
Turning to harvesting, he said operations performed well with the plant optimisation broadly on plan adding that the outsourcing strategy on harvesting continued to stabilise the sawmills log supply which resulted in high plant capacity utilisation.
“All logs supplied to the processing plants were from the company’s own plantations with no external logs purchased.
“Lumber production volume was 43 930m3 m3 (FY 2021: 45 871m3), four percent lower than prior period driven by low customer demand during the period under review.
“Lumber sales volume was 43 120m3 (FY2021: 49 047m3), the reduction was mainly because of lower aggregate demand, primarily in the local market,” said Hwenga.
He said efforts were underway to expand the export market base with particular focus on Zambia, Mozambique, and Botswana.
During the period under review, 713 hectares (FY2021: 341 hectares) were planted, a significant improvement compared to 2021.
Hwenga said Border Timbers was mindful of the impact of climate change on the planet and is adapting and conducting its operations in a way that is environmentally friendly.
“This consciousness prompted the company in succeeding to attain Forest Steward Council (FSC) Certification.
“With Imbeza Estate already certified, we are moving forward to having Sheba, Charter, and Tilbury Estates FSC certified by the end of 2023.
“Plantation fire damage remains the major business risk, particularly arson.”
In 2022, Border Timbers lost 235 hectares to fire (FY2021: 27 hectares) which is significant compared to the previous period.
“As a result, the company has further strengthened its plantation patrol teams, community engagement programs and acquired new firefighting equipment.
“We are grateful to the community and law enforcement agencies for their efforts and assistance in apprehending perpetrators of arson,” he said.
