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FHL Divests Shares In Loss-Making Basic Industries PNG

Fijian Holdings Limited divested its shares in its loss-making Papua New Guinea subsidiary, Basic Industries (PNG) Limited, on Thursday. FHL, in 2010 had incorporated Basic Industries (PNG) with a $2
02 Apr 2016 10:29
FHL Divests Shares In Loss-Making Basic Industries PNG
Pernix PNG took over Basic Industries (PNG) site and equipment and started operations yesterday.

Fijian Holdings Limited divested its shares in its loss-making Papua New Guinea subsidiary, Basic Industries (PNG) Limited, on Thursday.

FHL, in 2010 had incorporated Basic Industries (PNG) with a $2 million injection and since then, had poured in close to another $6 million to $8 million additional equity.

As at June 30, 2015, the company has accumulated loss of $8.2 million.

Fijian Holdings Group chief executive, Nouzab Fareed, confirming the divestment said since the inception, Basic Industries (PNG) had never made money.

“During 2010 to 2016, we had six different general managers and we still could not recover the losses,” he said.

“In 2014, we relocated the site to a larger 13 acre site and we invested further $2 million in terms of equipment. Still over the past 12 months, we could not recover the losses.”

Mr Fareed had in the past annual general meeting, had assured shareholders they wont increase losses further from Basic Industries (PNG).

He had further assured if they can’t recover, the will divest. Thus in keeping his word, FHL divested shares in Basic Industries PNG as at March 31, 2016.

Mr Fareed is also the President of the Fiji-PNG Business Council and reiterated to go into the PNG market without any local partners there will be calling for failure.

“One of the reasons we had failed in Papua New Guinea is because we didn’t have local partners and we didn’t The new owners

Basic Industries (PNG) Limited has been sold for 1 million Kina (FJ$675,000) to a new company, Pernix (PNG) Limited.

In doing so, Mr Fareed said they have made a marginal profit for FHL because the accumulated loss of $8.2 million had already been written off in the past.

But here is the catch. Pernix (PNG) is a new company in PNG and it is a joint venture between Pernix USA, a large institutional investor in PNG and Fijian Holdings.

The institutional investor name cannot be revealed at this stage but will be announced in the coming weeks.

Mr Fareed said Pernix Group from USA are specialists in construction of US Embassies, military installations as well as commercial buildings in addition to power plant maintenance and energy installations.

In addition, he confirmed FHL will be investing further 6 million Kina (FJ$4 million) in Pernix PNG which is going to be a large entity in PNG with exposure to construction and energy.  That company took over Basic Industries (PNG) site and equipment and started operations yesterday.

 

Why this situation?

Naturally one may ask why divest shares and then buy percentage shares through a joint venture.

Mr Fareed stressed he strongly believes PNG as a country as a lot of potential and highest in the Pacific because of 7 million people and more mines coming up.

“There is lot of development in PNG and no one can say PNG has no potential,” he said.

“But you can’t do business alone in PNG as we were doing with Basic Industries (PNG). So if you are going to PNG, you need a partner.”

And this is what FHL has done. With the institutional partner, there is local expertise in the mix and could bold well for the company and the FHL group.

 

Exploring Northern Pacific

Meanwhile, Fijian Holdings Group chairman, Iowane Naiveli, and Mr Fareed recently went on an exploration mission in the Northern Pacific. They were accompanied by representatives from Pernix.

They visited Guam, Saipan (Northern Mariana Island), Marshal Islands, Federated States of Micronesia (FSM) and Palau.

“We were exploring especially Guam and Saipan with regards to mainly investment in the area of power and construction,” he said.

“FHL sees potential in commercial properties in Guam and Saipan. The other three Northern Pacific Islands we are looking at exporting cement and aggregates.

“There is potential in Palau for tourism properties and cruise operations. In FSM, there is potential for quarry operations.

“We also see some potential for cement exports and finance related businesses such as asset financing in Marshall Islands.”

Feedback:  rachnal@fijisun.com.fj

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