Business / Companies
TN empire crumbles
19 Nov 2013 at 21:39hrs | Views
FURNITURE retailer, TN Harlequin is set to close down most of its factories and significantly reduce its workforce as the company responds to massive decline in demand of its products.
Chief executive of TN Lifestyle Holdings, which owns TN Harlequin, Mr Tawanda Nyambirai also said the group would "with immediate effect" sell some of its properties to raise money to fund the retrenchment exercise and pay outstanding salaries.
TN Harlequin is a dominant furniture retailer in the country. It has been the largest employer and contributor to turnover in the furniture industry over the past three years.
However, its furniture sales have dropped from between $1,8 million and $2,1million per month to between $500 000 and $800 000 per month," said Mr Nyambirai.
But the costs have remained more or less the same. TN Harlequin owns four factories in Harare and these are Case Goods factory, Beds Factory, Foam Manufacturing Factory and Lounge Manufacturing Factory.
In Bulawayo, the company has a saw milling business known as Wood Industries which operates on its premises. It also operates a combined Case Goods and Lounge Factory in Bulawayo.
"Management is currently discussing the feasibility of closing down, or significantly down scaling some of these operations," Mr Nyambirai said in a statement.
"The company will (also) commence the disposal process of the properties with immediate effect to ensure early payment of the exit packages and arrear salaries. We will fund the retrenchments from the disposal of some of the properties we own. We own properties in
Harare, Bulawayo, Victoria Falls, Masvingo, Chivu, Zvishavane, Chiredzi, Mutare and Marondera with a value estimated to exceed $6 million."
Mr Nyambirai said the company employs over 1 000 workers and "most of these" would be retrenched to ensure that staff costs are correctly aligned to the level of business that the company is getting.
He added that the company may also be forced to close down some its shops due to high rentals.
"(The) management has reached a ceiling on what it can do to reduce its rental costs and will have to close down the high cost branches. We have opened discussions with some of our landlords with a view to reducing our occupancy costs," said Mr Nyambirai.
"If we do not get a significant reduction in rent, we will have to close down the expensive shops or relocate them. Over the past few years, Zimbabwe has witnessed closure of factories as companies are failing to cope with the prevailing economic challenges.
According to the July 2013 National Social Security Authority, Harare Regional Employer Closures and Registrations Report for the period between July 2011 and July 2013, a total of 711 companies in Harare closed down, rendering 8 336 people jobless.
There are fears that most companies may fail to re-open after an annual shut down in December. The country has remained unattractive to long term funding, largely due to a debt estimated at $11 billion. This has resulted in the unavailability of sustainable long term funding, with the available short term credit being too expensive to revive the industry.
The economic challenges have negatively affected the financial performance of most companies, including TN Harlequin. Furniture products have seen significant reduction in demand as disposable incomes came under pressure from the liquidity crunch. Most households' disposable incomes are just enough to meet basic needs.
Mr Nyambirai said the lack of funding to finance long term credit sales had worsened the situation for TN Harlequin. As a result, sales have declined significantly over the past two years.
And in the absence of sustainable funding, the business cannot extend long term credit to customers to stimulate demand. Consequently TN Harlequin has been making losses since the beginning of the year with gross profit way below the levels required to cover operating costs.
Mr Nyambirai said the money that the business was receiving from cash sales and credit instalment was now less than what it required to meet its daily operating costs.
These costs include the purchase of raw materials, rentals and staff costs. The lack of funding in the economy negatively affects the business' ability to raise extra cash.
Chief executive of TN Lifestyle Holdings, which owns TN Harlequin, Mr Tawanda Nyambirai also said the group would "with immediate effect" sell some of its properties to raise money to fund the retrenchment exercise and pay outstanding salaries.
TN Harlequin is a dominant furniture retailer in the country. It has been the largest employer and contributor to turnover in the furniture industry over the past three years.
However, its furniture sales have dropped from between $1,8 million and $2,1million per month to between $500 000 and $800 000 per month," said Mr Nyambirai.
But the costs have remained more or less the same. TN Harlequin owns four factories in Harare and these are Case Goods factory, Beds Factory, Foam Manufacturing Factory and Lounge Manufacturing Factory.
In Bulawayo, the company has a saw milling business known as Wood Industries which operates on its premises. It also operates a combined Case Goods and Lounge Factory in Bulawayo.
"Management is currently discussing the feasibility of closing down, or significantly down scaling some of these operations," Mr Nyambirai said in a statement.
"The company will (also) commence the disposal process of the properties with immediate effect to ensure early payment of the exit packages and arrear salaries. We will fund the retrenchments from the disposal of some of the properties we own. We own properties in
Harare, Bulawayo, Victoria Falls, Masvingo, Chivu, Zvishavane, Chiredzi, Mutare and Marondera with a value estimated to exceed $6 million."
Mr Nyambirai said the company employs over 1 000 workers and "most of these" would be retrenched to ensure that staff costs are correctly aligned to the level of business that the company is getting.
He added that the company may also be forced to close down some its shops due to high rentals.
"(The) management has reached a ceiling on what it can do to reduce its rental costs and will have to close down the high cost branches. We have opened discussions with some of our landlords with a view to reducing our occupancy costs," said Mr Nyambirai.
"If we do not get a significant reduction in rent, we will have to close down the expensive shops or relocate them. Over the past few years, Zimbabwe has witnessed closure of factories as companies are failing to cope with the prevailing economic challenges.
According to the July 2013 National Social Security Authority, Harare Regional Employer Closures and Registrations Report for the period between July 2011 and July 2013, a total of 711 companies in Harare closed down, rendering 8 336 people jobless.
There are fears that most companies may fail to re-open after an annual shut down in December. The country has remained unattractive to long term funding, largely due to a debt estimated at $11 billion. This has resulted in the unavailability of sustainable long term funding, with the available short term credit being too expensive to revive the industry.
The economic challenges have negatively affected the financial performance of most companies, including TN Harlequin. Furniture products have seen significant reduction in demand as disposable incomes came under pressure from the liquidity crunch. Most households' disposable incomes are just enough to meet basic needs.
Mr Nyambirai said the lack of funding to finance long term credit sales had worsened the situation for TN Harlequin. As a result, sales have declined significantly over the past two years.
And in the absence of sustainable funding, the business cannot extend long term credit to customers to stimulate demand. Consequently TN Harlequin has been making losses since the beginning of the year with gross profit way below the levels required to cover operating costs.
Mr Nyambirai said the money that the business was receiving from cash sales and credit instalment was now less than what it required to meet its daily operating costs.
These costs include the purchase of raw materials, rentals and staff costs. The lack of funding in the economy negatively affects the business' ability to raise extra cash.
Source - herald
