ZSE suspends Cottco

HARARE - Agro-focused group Cottco Holdings Limited has been suspended from the Zimbabwe Stock Exchange (ZSE).

This comes as the troubled group, which has been reeling from debts amounting to $41 million since dollarisation in 2009, applied for provisional judicial management to the High Court on Thursday.

The group’s financials for the full year to March 2014, indicated that the company reduced its debt by 66 percent to $41,6 million from $126 million in previous comparable period.

It managed to reduce the debt after disposing of its shareholding in two subsidiaries, Olivine Industries and SeedCo.

Despite recording $2 million profit during the year to March, recovering from a loss of $14,9 million, the judicial management application indicated that it was technically insolvent.

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.

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.

An analyst with a local financial institution, who preferred anonymity, said “judicial management success rate is low in Zimbabwe and I foresee Cottco hitting rock bottom.”

He said Cottco’s current managing director Collins Chihuri is now taking the fall for troubles created by his predecessors as some of the company’s creditors had already instituted proceedings to recover dues.

“Predecessors did nothing and only observed the company’s woes mounting. They took a poor strategic direction — like focusing on reviving Olivine when everyone in country knew that manufacturing was dead and continually faces immense competition from imports,” said the analyst.

He added that it was important that Cottco’s auditors also explain their audit opinion in the last set of results.

Cottco’s major shareholders include the National Security Authority (Nssa) with 22,19 percent stake; Old Mutual with 13,7 percent and Standard Bank Nominees which holds 11,66 percent.

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