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VENTURES: Still No Harvest For Vinguard

 



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VINGUARD, the grape packaging technology company owned by Stellenbosch-based venture capitalists JDH, still appears to be having no luck in finding traction in local and international markets.

Vinguard offers grape packaging technology (involving polymeric sulphur dioxide sheets for optimal post-harvest protection of table grapes), and is in direct competition with the larger (and presumably more profitable) GrapeTek.

CBN last reviewed Vinguard’s prospects in early 2009 when there was some hope that a R10 million capital injection into JDH would ensure that the manufacturer sheets for grape packaging would be able to bolster productivity and market share.

The R10 million capital injection – should readers need reminding – came at a time when paper and packaging giant Mondi opted to ‘sell’ its 37% stake in Vinguard for a nominal R1. Mondi’s decision – and there is no subtle way of putting this – suggested Vinguard was a hopeless case, something which executives at JDH would have wanted to quickly refute.

At this stage, it appears Mondi may have done the prudent thing by giving away its stake in Vinguard.

Half-year figures to end December 2009 do not make for convincing reading. Vinguard managed turnover of just R2.6 million, which was transformed into a loss of R1.6m for the interim period. Essentially this means Vinguard is getting but a sliver of the global market that JDH reckoned was worth some R500 million a year.

In his comments on the interim period trading, JDH CEO Harry Minnie attributes the weak performance to the strong Rand - which crimped margins and curtailed efforts to export profitably.

Despite the dour performance, Minnie reckons Vinguard was successful in expanding its local market - especially in the Northern Cape.

The problem, it seems, for JDH is that exports are proving tricky due to the strong rand (and, CBN, would presume, the paucity of working capital).

Minnie notes that Vinguard severely cut down on its exports to India.

He explains that low margins and the added credit risk would have put undue risk on JDH “as a whole”.

Minnie’s concern around exports is understandable with Lazaron, JDH’s other major investment, also running at a loss. The most worrying aspect is that at the end of 2009 JDH did not exactly have the balance sheet muscle to be able to boost productivity or increase marketing efforts at Vinguard. A cash balance of R400 000 is all that remains of the R10 million cash injection on the cash flow statement, while the overdraft has extended to almost R250 000.

Not surprisingly then Minnie reports that JDH is engaged in various discussions with interested groups regarding expansion and additional financing.

But with the rand proving to be ‘strong for longer’ and the local economy (at best) at an early stage of recovery, the next six months are going to be a helluva test for Vinguard.


 
 
 
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