To export bottlers’ grade refined sugar … Interest for ZAMCO stake
StarAfricaCorporation has been granted approvals for the export of its bottlers’ grade refined sugar into regional markets a move that is set to boost the sugar producer’s revenue, chairman Joe Mutizwa told Business Weekly.
Mutizwa said getting the approvals has been a taxing exercise as the company had to go through rigorous processes to get the nod.
“We finally got approvals for us to be able to export bottlers’ grade refined sugar into the region. Most of the issues had to do with quality of product in export markets,” said Mutizwa.
Coca-Cola’s seal of approval
Starafrica recently got its plant re-certified by The Coca-Cola Company (TCCC), which allows the company to sell products to TCCC-affiliated entities within Southern Africa.
Efforts are ongoing to develop the export market and expectation is that the groundwork covered in the year under review will start yielding results in the ensuing year, Mutizwa said in a statement accompanying the sugar producer’s results for the year ended March 31, 2018.
The company has already sent samples to Botswana where it is confident that sales of not less than 6 000 tonnes will be achieved in the coming year.
There is also advanced exploratory work for the Central African market from which StarAfricaCorporation expects some pickings in the year.
Locally, the company supplies bottlers’ grade refined sugar to Zimbabwe Stock Exchange-listed entity Delta Corporation among other beverages manufacturers.
The latest developments on the export front come at a time the company is slowly creeping back its long lost local market share. Rival Tongaat Hullet has been dominating the sugar market for years now.
StarafricaCorporation is however also enjoying growth in local sales with Mutizwa saying the local market has continued to grow as almost all the growth in volumes registered during the year under review coming from local sales, especially in the manufacturing sector.
The company is encouraged by the developments in the wider economy which are expected to increase demand within both the industrial and consumer segments, Mutizwa said.
“It is pleasing that the local market’s sugar requirements are now being supplied in full by the Sugar Industry and the company is well equipped to meet the quality and tonnage requirements of all segments of this market,” he said.
Pleasing set of results
For the year ended March 31, 2018 StarafricaCorporation registered an encouraging set of results selling more than 62 889 tonnes of sugar up 51 percent from 41 669 tonnes sold prior year comparative.
Revenue for the period were 47 percent firmer to $48,1 million while EBITDA was up 95 percent to $3,1 million.
The company’s high debt obligations however weighed on the bottom line resulting in a loss for the year of $3, 8 million and lower than the loss of $5, 6 million recorded prior year comparative. The FY2018 loss is the lowest since dollarisation.
Net finance costs for the period amounted to $6,2 million.
Cost of debt to significantly reduce
Mutizwa however told Business Weekly that the high debt obligations are now a thing of the past following Zimbabwe Asset Management Corporation Limited (Zamco)’s conversion of its debt into equity.
Zamco emerged with nearly 60 percent shareholding in StarafricaCorporation after secondary scheme creditors opted to convert a combined debt amounting to $46,85 million into ordinary shares.
With the a huge chunk of the debt gone, Mutizwa said finance costs will come down to less than $2,6 million. He however added that post year end, more debtors had expressed interest in converting their debts into equity and if that materialises, further reduction in finance costs are expected.
Mutizwa said the company has now “passed the big huddle and next year we expect to be profitable at the bottom line. We are already profitable at EBITDA level.”
“Going forward we are working with key stakeholders to chart a path to sustainable growth and profitability. This will be the second phase of the turnaround strategy.”
Despite the improved performance, major shareholder, Zamco, is not looking at holding on to the equity for longer.
We are open to offers and we have since received quite a number of interested investors said Zamco chief executive Dr Cosmas Kanhai.
“There are lots of interest in the company and some potential investors have already completed their due diligence, while others are still in the process. This is from both local and foreign investors.”
He however, said most had indicated they would come with firm offers after elections.
“In the meantime we will come up with measures that we think will enhance value in the company, but as I said we are open to offers.”