Bitter times for StarAfrica as profit dips

Joe Mutizwa

HARARE – Sugar processor starafrica corporation Limited’s profit for the year to March 31, 2020 came in 19 percent lower at $54,5 million compared to $68,1 million recorded in the prior year as sugar production and sales took a dip.

According to the group, profitability was also impacted by a fair value adjustment on investment properties and net finance costs which resulted from foreign exchange losses on foreign borrowings.

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) increased by 115 percent to $206 million relative to $96 million that was achieved last year as a result of cost management strategies. Basic earnings per share went down 16 percent to 1,16 cents from 1,39 cents recorded in the comparable year.

Total turnover rose by 114 percent to $1,21 billion compared to $565 million realised in prior year.

The group’s net working capital increased by over 300 percent to $50,6 million from $11,8 million achieved in prior year.

At Goldstar Sugars Harare (GSSH) production fell 9 percent to 65 568 tonnes compared to 72 252 tonnes of refined sugar produced in prior year.

“The decrease in production was attributable to prolonged power outages experienced in July and August 2019 and intermittent water supplies which adversely affected output at the sugar refining plant during the year under review. Power supply, however, improved significantly in the last quarter of the year,” said chairman Mr Joe Mutizwa.

The business unit sold 63 993 tonnes, which was 10 percent below 71 683 tonnes sold last year. Sales volumes were in line with production and included exports generated from new markets that were developed in the region during the year under review.

Sales volumes at Country Choice Foods (CCF) went down 8 percent on the back of low disposable incomes although it remained a market leader against competitor products, including new entrants.

Mr Mutizwa also attributed the sales decline to shortages in flour experienced during the year under review, as the baking industry is one of CCF’s major markets.

The group is looking at repositioning the business to take advantage of prevailing growth opportunities in the local and export food industries and markets.

The properties business recorded a 12 percent decrease in turnover to $4,4 million from $5 million recorded in prior year due to relatively lower rentals that obtained during the year under review consequent upon the economic downturn which affected most of the tenants.

The regional operation, Tongaat Hulett Botswana (THB) maintained its dominance of the Botswana sugar market. The associate company recorded a profit after tax of $34,6 million of which the group’s share was $11,5 million after converting the earnings into Zimbabwean dollars at the official exchange rate as at March 31, 2020.

Despite the economic headwinds obtaining in the country coupled with the effects of Covid-19, management is upbeat the policies Government is working on may bear positive outcomes if implemented properly.

“The group, however, believes that the policies being implemented by the Government, although resulting in initial unfavourable pressures, will eventually lead to a better business environment.

“If implemented correctly, the recently introduced foreign currency auction system should stabilise the exchange rate with positive ramifications in the economy,” said Mr Mutizwa.

The group’s focus will be on implementing strategies that enhance profitability, consolidate market share on the domestic and export market. – Herald

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