Celsys Limited has shut down

Celsys, which bought Venekera Works in 2007, has shut down. A sad end for a really promising company.

Here is a statement from the company

Via TechZim.

Celsys Print has been experiencing extreme hardship and has been incurring substantial losses for many years. It has incurred about $5m of losses in the last five years alone. All these losses, plus some capital expansion projects, have been funded solely by way of loans from the majority shareholder, Blueberry Limited. The total Liabilities of the company are circa $6.75m of which over 80% or circa $5.5m is owed to this majority shareholder and relates to their funding. Third party creditors, net of current assets, are owed around $725k.

One of the main reasons for the collapse of the company has been the rapid decline of the Print Industry in Zimbabwe since 2008, and the general economic environment in the country.

Paper and Ink are the main inputs for any printer. Zimbabwe has not had a domestic paper and ink manufacturing industry for the longest time. Hence Zimbabwe has been forced to import both of these inputs. The duty structure in the country for the last many years has been such that there is a 15% duty levied on paper and inks plus 15% Vat. On the other hand, there is only a 5% duty and 0% Vat when importing “printed material.” Hence it has been circa 25% cheaper to import “printed material” rather than printing locally in Zimbabwe.

The biggest competitors of Celsys over the years have been South African printers who have been taking away most of the bulk and repeat print orders in Zimbabwe. The South African Rand has declined 60% since 2013 from ZAR 8.5 per US dollar on 1st Jan 2013 to ZAR 13.7 to US dollar recently. This has made South African printers much cheaper and efficient as their overheads have become 60% cheaper compared to US dollar Zimbabwean overheads in recent times. In particular, the cost of employees has been very high in Zimbabwe and due to the economic circumstances productivity has been low. As a result, Celsys Print has been put to further strain and struggle since it has carried one of the largest overheads among domestic printers as it has been one of the biggest Zimbabwean printers based on installed capacity. The adverse duty implications for Zimbabwean Printers as against South African printers have added to the woes of the Industry.

Another reason that Celsys has had a set-back is because of the big debt that is owed to it by Afriasia Bank. Prior to its liquidation, the bank was leasing 20 ATMs from Celsys and the arrangement was that Afriasia Bank would pay a leasing fee every month. Afriasia Bank, however, struggled to pay for the ATMs and their debt has accumulated to a staggering bill of US$165 000. Afriasia Bank has since been placed under liquidation and payments of this amount have not been forthcoming. This amount would have been very useful to turn around Celsys’ position. A further US$200 000 plus has not been paid by other debtors. Had these debts been paid the company would have been in a better position.

The last five years of losses have resulted in Celsys accumulating massive debts, mainly to its principal shareholder. This shareholder has thankfully been funding the losses of the company and as a result have put in circa $5.5m as Shareholder loans in the hope of reviving the company and keeping it alive. Through this, the Board and Management of Celsys have made every effort to resuscitate the business in order to provide a livelihood for its workers.

After a lot of effort, the company had managed to cut its cost base but revenues have collapsed even more, and there are no margins. The Management of the company believed that given the company’s current state of affairs and cost structure, it could get to a point where it can earn enough to pay all its current obligations and then grow from there. Break even revenues had been reduced from $210,000 per month to $75,000 per month but even getting those revenues is proving to be a struggle given dumping from South Africa. The recent change in the structure on import duties whereby importers of printed material will now pay a higher duty will also have had a positive impact on the business of Celsys. For this reason the Management believed that Celsys had a chance of surviving and could continue to provide employment to its workers and continue to  contribute to the Zimbabwean economy given the right environment. An application was accordingly made for Judicial Management but was not approved by the Courts as the Judge could not be convinced that the company had a future.

Following the rejection of this application, Celsys Limited’s landlord, The Hindoo Society, sent The Sherriff in and the company was evicted from its premises on 15th October. The company has been locked out and as a result has very few options and hence may be put under liquidation as a few creditors have indicated their intention to apply for forced liquidation.