Cottco pins hope on increased production

HARARE - Rebranded Cottco Holdings Limited (Cottco) is pinning its revival hopes on the increased cotton production in the country.

The agriculture-focused firm, which has been reeling from debts since dollarisation, recently recorded $2, million profit for the year ended March 31, from a loss of $14,9 million last year.

Freeman Kembo, the Cottco chairman said the group has been refocused to drive resurgent performance in the cotton business driven by a stronger balance sheet and complemented by reforms in the cotton industry’s regulations.

“The stipulation of minimum funding thresholds for all ginners by the Agricultural Marketing Authority should underpin an increase in cotton crop production,” he said.

“The aforementioned national effort to resuscitate the cotton industry is motivated by the fact that cotton remains a significant foreign currency earner in the agricultural sector,” added Kembo.

This comes as cotton production in Zimbabwe and the region has been declining due to a myriad of factors, chief among them poor rainfall distribution across the country and a reduction in inputs support by the cotton industry on speculation of poor industry compliance and excessive side-marketing.

National cotton output declined from 250 000 tonnes in 2012/13 to 145 000 tonnes in the 2013/14 season, a decrease of 42 percent.

Cottco recently disposed its two subsidiaries — Olivine Industries and SeedCo — after former holding company, AICO, sold its stake in SeedCo to British firm Limagrain as part of a $60 million private placement deal sealed last year.

Collins Chihuri, managing director of Cotton Company of Zimbabwe Limited said the recapitalisation of Cottco had paved way for a stronger and more competitive business.

“Focus will remain on increasing our production volumes while containing costs,” he said adding that improved service delivery to farmers would remain central to the business as farmer retention would be essential in maintaining the firms market leadership.

Chihuri said the company was targeting 190 000 tonnes of cotton for this year compared to 145 000 tonnes recorded in the last season.

The company recorded a 77 percent decline in cotton sales volumes while revenue was 67 percent down, attributed to a decline in volumes from the budgeted 110,000 tonnes to actual volumes of 35,665 tonnes which was achieved after the loss of  significant volumes to side-marketing and a lower than expected national crop, Chihuri said.

The group’s financials show their debt as at March 2014 reduced 66 percent from $126 million in the previous period to $41,6 million.

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