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Conglomerate Press Corporation Limited (PCL) said on Tuesday it decided to sale its subsidiary Tambala Food Products because of continued dwindling sales volumes and to strengthen the Press group’s income.
In an interview, PCL group operations executive Pius Mulipa also disputed suggestions that old management styles and interference from the PCL corporate office are among the contributing factors to the closure of Tambala and other subsidiaries like Enterprise Containers Limited that was sold last year.
“That’s a fallacy. It’s not a clever conclusion. If there is interference, why are other companies in the same Press Group succeeding?” Mulipa queried.
Some quarters of the business community also argued that Tambala Foods had great potential to remain afloat but was collapsing because PCL wanted to do away with what are perceived as small investments to concentrate on projects like the Cape Maclear hotel and a fisheries business in Mangochi.
But Mulipa dismissed this describing it as “over simplification of parameters used to make crucial corporate decisions.”
In his 2003 report to shareholders, PCL group chief executive Matthews Chikaonda said Tambala’s sales volumes continued to fall due to severe price competition on the commodity brands notably rice, salt and milk powder.
Further to this, the distribution function which was Tambala’s strength was compromised by rising distribution costs which, Chikaonda noted, could not be matched by price increases.
“Consequently, a decision was made to de-list all products that did not meet a specified gross margin percentage and this resulted in the de-listing of over 20 product lines,” said Chikaonda.
He said due to these changes, staff and distribution fleet numbers were reduced to match the decreased product portfolio.
Last week, PCL said in a statement that its board approved a recommendation for a major restructuring of Tambala Foods as a way of strengthening and stabilising the group’s income.
PCL said due to this development, Chombe Tea brand would be divested from the Tambala brands and placed in a joint venture tea packaging operation with an international packaging and distribution company from the Sadc region.
Mulipa could, however, not disclose the name of the joint venture partner.
He said negotiations were still underway hence disclosure might negatively impact on the deal.
Mulipa said the joint-venture partner was identified after a search by the conglomerate’s consultants.
But the Tambala brand name will, however, be sold as a package to a successful bidder, said the statement. The closing date for bids was October 30 this year.
In the 2003 annual report, PCL mentioned implementation of strict performance criteria for investments and divesting from under-performing assets in a timely manner as one of the group’s policies to float above the waters.
Board chairman Dean Lungu is on record to have attributed last year’s K1.1 billion group profits to the elimination of major loss making operations in 2002 such as Press Furniture, Press Bakeries, Enterprise Containers and Hardware and General Dealers.
In his annual report, he added that other loss-making investments began turning around after successful restructuring.
Listed on the Malawi and London stock exchanges, PCL has investments in various sectors of the Malawi economy including BP Malawi Limited, PTC Group, Macsteel Malawi, National Bank of Malawi, Maldeco Fisheries, Malawi Pharmacies, Ethanol Company, Press-Cane, Press Properties, Plate Glass Industries and Malawi Distilleries Limited.
It also has investments in Carlsberg and Sobo Group, Limbe Leaf Tobacco and First Discount House Limited and now eyes to buy Malawi’s lone ground phone operator Malawi Telecommunications Limited.
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