Cottco makes $30m loss

HARARE – Cottco Holdings Limited (Cottco) has registered a $30,2 million loss in the full year to March 31, 2015 from a profit of $14,9 million recorded in the same period last year.

The company’s executive chairman, Douglas Ncube, said the loss included impairments of $11,2 million in respect of trade and other receivables, inventory and inputs receivables.

“Included in last year’s profit is the amount of $37,2 million arising from profit on the disposal of the discontinued operations,” he said.

The group also recorded a nine percent decrease in revenue from $42 million to $38,3 million for the period under review.

“Group margins have remained low and were compounded by the high producer price paid as a market defense mechanism, a strategy implemented in order to protect market share and to set the tone for discipline in the industry for seasons to come,” Ncube said.

Finance costs, however, decreased 40 percent to $8 million on pre finance contracts, liquidation of idle assets and reduced costs.

In Zimbabwe, the national cotton output declined from 145 000 tonnes to 135 000, a seven percent slump due to declining international lint prices which went from $0,89 to an average of $0,72 per pound.

At the moment, the cotton industry is still negotiating with farmers for this year’s producer price, which will be determined by the international lint price, costs of production for the farmer and cost of the ginner.

Meanwhile, Cottco, which operates five ginneries in Zimbabwe with an annual processing capacity of 150 000 metric tonnes of seed cotton,  is seeking a partner to help it with funding after talks with the China-Africa Development Fund collapsed and as it renegotiates debt payments with lenders.

Trade in its shares on the local bourse, the Zimbabwe Stock Exchange, was suspended, after 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.

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

The company has since suspended its application for judicial management and is talking to lenders about reorganising its debt, Cottco said in a document sent to investors in March.

The company, which started as the Cotton Marketing Board in 1969, was sold to private investors in 1994 and began trading on the bourse in 1997.

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