eBusiness Weekly
Enacy Mapakame-Business Writer
Diversified crocodile breeder, Padenga Holdings is projected to register revenue growth to reach an estimated US$84 million for the financial year 2021 spurred by gold mining operations and the higher foreign currency retentions from following its listing on forex denominated Victoria Falls Exchange (VFEX) listing.
Following an export incentive introduced by the Government in May this year, Padenga’s board made a decision to delist from the Zimbabwe Stock Exchange (ZSE) in order to relist on the VFEX.
Padenga became the second listing on the VFEX on July 9, 2021. The firm was traditionally a crocodile breeder, skin and meat producer, until recently when it diversified into gold mining through the successful acquisition of a 50,01 percent shareholding in Dallaglio Investments (Private) Limited.
Stockbrokers IH Securities see the gold operations at Padenga’s Eureka Mine, held through Dallaglio, and export incentives boosting current full year revenue and in the future .
“Overall revenues for Padenga are expected to remain on an upward trend carried by extension of the gold mining operations, as well as higher forex retention given the VFEX listing. Export facing companies listed on the VFEX are now entitled to higher retention rates on their incremental exports. In addition, the listing on the VFEX enables Padenga to raise capital in foreign currency from a deeper investor base to pursue viable acquisitions in related export sectors.
“The listing also enables shareholders to unlock a ‘real’ USD valuation of the business, with capital gains and dividends realisable in hard currency,” said IH in an earnings review of the group.
Eureka mine recently started production and is expected to reach full production by year end. The mining operations are forecasted to produce 983kg (31 603oz) gold for the financial year 2021.
During the half year to June 30, 2021, mining volumes at its other gold miner, Pickstone, were 22 percent below the comparable period last year due to feed grade ore and flooding of the open pit during the first quarter of the year as well as the consequences of inappropriate mining methods used historically which limit opportunities to cost effectively expand the open pit operation.
According to the group, management has fully reviewed its options and is working on remedial programme.
Dallaglio’s revenue contributed 72 percent to Padenga’s total revenue. The mining segment, however, recorded a loss of US$9,5 million compared to a profit US$2,6 million weighed down by the low ore grade and high strip ratio at Pickstone Peerless mine.
Overall group revenue went down by a marginal 6 percent to US$21,2 million from US$22,5 million during the same period last year while a loss before tax of US$12,7 million was recorded, which was 237 percent below the profit of US$9,3 million recorded in the comparable prior year period.
The loss was largely driven by low ore grade and high strip ratio at Pickston Peerless mine and below target sales volumes for the Zimbabwe crocodile operation.
“Of concern is the narrowing profit margin as finance costs have increased to fund expansion of the mining business. In addition, reduced average prices for skins will likely lead to continued strain on EBITDA (earnings before interest tax depreciation and amortisation) margins in the short term.
“Padenga’s current loss position mirrors the unique period the company is in; balancing a shifting skins market, Covid-19 restrictions and re-capacitating their mining business.
“It is likely that some recovery in the crocodile business and the expansion of the mining subsidiary will begin to lift the bottom line in the medium to long term,” said IH Securities.
Revenue for the crocodile business was down 25 percent to US$4,7 million from US$6,4 million and the business accounted for 23 percent of group’s total revenue.
Fair value adjustment fell as the larger crocodile skins in inventory are expected to fetch lower prices. Resultantly, the crocodile business’ loss for the period was US$1,87 million from a profit of US$3,5 million.
Volume of skins sold at the US-based alligator segment went down 48 percent with the bulk being lower grade skins sold to best advantage. The Texas operation remained hamstrung by oversupply and reduced demand in the market for watch band size skins.
Revenue from the alligator business was down 50 percent to US$1,1 million from US$2,3 million in the same period, contributing 5 percent to the group’s total revenue.
Following re-opening of European retail market after the he easing of lockdown restrictions and the added online sales initiatives implemented, it is anticipated the demand for the larger sized skins will return to pre-Covid-19 volumes.
