Cottco judicial management suspended

HARARE - Agro-focused Cottco Holdings Limited (Cottco)’s application for judicial management has been suspended.

The group — saddled by nearly $60 million debt and operational challenges — said the suspension is meant to enable dialogue with creditors.

“…the board applied for voluntary judicial management to the High Court of Zimbabwe. Subsequent to this, a suspension of the application has been agreed to allow for further discussion with lenders,” Cottco said in its financials for the half year ended September 30, 2014.

While the group reduced its borrowings by 63 percent during the period under review, revenue stood at $17,8 million — 15 percent down from $20,9 million recorded in prior comparable period.

“Revenue declined on account of delayed sales take off and a reduction in international lint prices. Sales volumes as at September are lower than those for last year, however, full year volumes are projected to exceed prior year due to higher intake volumes achieved,” the group said.

Cottco has a $56 million debt, which attracted $16,8 million interest in the year to March 2013.

However, the cotton processor narrowed its loss before taxation by 30 percent to $9,9 million from  $13 million, on the back of cost containment initiatives.

Cottco concluded a rights offer in January this year to raise $15 million and also sold some of its assets to raise capital to reduce the debt to between $20 million and $30 million.

In January, the group — recently rebranded from AICO Africa — received $20,4 million from the part sale of its stake in SeedCo to British firm Limagrain as part of a $60 million private placement deal sealed last year. It rebranded to Cottco Holdings soon after.

Analysts say its likely that the company, the largest cotton ginner in southern Africa, did not repay some of its debts resulting in creditors instituting legal proceedings.

The company’s balance sheet had reportedly become unsustainable, as its liabilities exceeded assets.

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.

The group appointed Douglas Ncube as executive chairman for three months starting from December 8, 2014 after the resignation of board chairman Freeman Kembo in October.

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.

Comments (2)

Maiwee company yangu yaparara I used to work for this company whilst it was a blue chip company with deep pockets before the 1-2-3 kid became the Damaging Director. 1-2-3 Kid brought a bunch of thieves who claimed to be Christians while they stole all the money and his successor was even worse. Please Honorable Sly quit your cabinet post and come and revive you company the thieves you left just looted the company coffers.

kadyamahara - 17 December 2014

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