Exchange losses hammer starafricacorporation

LIVINGSTONE MARUFU

Listed sugar processor, starafricacorporation, suffered a monetary loss amounting to ZWL$37.1m in the six months to September 2020 resulting in the company swinging into a ZWL$54m loss from a profit of ZWL$153.2m recorded in prior comparative period.

In the comparative period in 2019, starafrica enjoyed ZWL$301m exchange gain.

Finance costs which stood at ZWL$22m in the reviewed period also complicated matters for starafricacorporation.

The company’s loss was exacerbated by impairment loss amounting to ZWL$34m which was written off following an incident of fire in August this year. The fire destroyed the raw sugar warehouse which had raw materials that was stored in the facility.

“The profitable performance was mainly hampered by foreign exchange losses and finance costs on foreign borrowings following the introduction of the Reserve Bank of Zimbabwe forex auction system, as a result the group incurred a loss after tax of ZWL$54m,” starafricacorporation board chairman, Joe Mutizwa, said in a commentary accompanying the company’s half year results which were published this week.

Revenues for the group went up 24% to ZWL$1.876bn in the reviewed period from ZWL$1.5bn recorded in the same period last year.

Earnings before interest, tax, depreciation, and amortisation increased 34% to ZWL$318m relative to ZWL$238m that was achieved last year because of cost management strategies.

The group’s net working capital increased to ZWL$391m during the first half of 2020 from ZWL$138m recorded during the same period last year.

Total assets for the group stood at ZWL$2.5bn from ZWL$2.2bn.

Goldstar Sugars Harare (GSSH) sold 26, 959 tonnes during the first half of  2020 against 30, 469 tonnes sold during the comparative period last year and this was attributed to COVID-19  related challenges, associated transport challenges, maintenance shutdown in August 2020 and the disruptions caused by fire that gutted the raw sugar.

The rehabilitation of the destroyed warehouse is in the process and the project is expected to be completed within six months.

starafrica has put alternative arrangements in place to ensure adequate feed stock (raw sugar) to the plant.

The group enjoyed a stable power supply during the period under review due to improved hydro power generation at Kariba, however water supply had been erratic due to water constraints from the City of Harare, Mutizwa said.

The company has installed water storage tanks with a view of boosting production capacity and improving manufacturing efficiencies.

Mutizwa said Country Choice Foods (CCF) products continued to dominate the market but volumes were 11% down due to low disposable incomes and depressed business activity.

The properties business recorded a 53% increase in turnover to ZWL$8.2m from ZWL$5.3m recorded during the 2019 half year due to improved occupancy levels.

Starafrica associate, Tongaat Hulett Botswana, continue to be major player in Botswana sugar market as it recorded a profit after tax of ZWL$99.95m, of which the company’s share was ZWL$33.32m after converting the earnings to Zimbabwean dollars at the RBZ auction exchange rate that prevailed on September 30 2020.

The scheme of arrangement, whose tenure expires in 2022, remains in place with 97.57% creditors having been settled.

Post the reporting period, the company said discussions with foreign scheme creditors regarding settlement of the outstanding amounts and the group has reached a stage which may result in debt being extinguished by March 31 2021.

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