AICO Africa shelves US$50m rights issue

Industries and retire its debt.
Chief executive officer, Mr Pat Davenish said the shareholders did not warm up to the rights issue and it was put on hold.
“We had a very strong pushback from shareholders and we have put the rights issue on hold. But we have managed to secure a loan,” said Mr Davenish without disclosing the amount.
The proposed rights issue was expected to expunge debt and necessitate the restructuring of Aico’s loans.
Analysts also expected the funding to grow and sustain current operations resulting in both the Cottco and FMCG business returning to profitability.
Aico is valued at about US$100 million on the Zimbabwe Stock Exchange.
The rights issue was equivalent to half of its market capitalisation, which could be one of the reasons why shareholders developed cold feet on the back of biting liquidity challenges.
In the face of the tight liquidity on the market, shareholders of companies have failed to follow their rights.
Post-dollarisation, a number of companies have restructured, right-sized and adapted to the realities of the new US dollar environment.
Recapitalisation exercises have been undertaken at African Sun (US$10m), ART (US$4,7 million), FBC (US$8 million), Medtech (US$1,6 million) and Nicoz Diamond (US$4 million).
Others include NMB (US$10,3 million), OK Zimbabwe (US$15 million), PGI (US$4,5 million), Starafrica (US$10 million and TN Holdings (US$1,1 million), although for the most the amounts raised fell short of what was required to fully recapitalise.
Meanwhile, Mr Davenish said they were also in the process of offloading their 75 percent shareholding in their subsidiary, Scottco and the entire loss- making frozen vegetable arm, Exhort.
This will result in the conglomerate concentrating on its core business of cotton, seed and Fast Moving Consumer Goods under Olivine Industries.
Aico’s first half-year financial results for 2011 indicate that finance costs remain a major area of concern.
Finance charges amounting to US$8,2 million were recorded as a result of high borrowing.
Total loss before tax amounted to US$11,7 million while loss for the period was US$10,9 translating to a loss per share of US1,89c.
Aico has a volatile earnings stream due to the seasonal variability of dry land cotton production and unpredictable lint prices on world commodity mar- kets.
Aico’s seed business had managed to recover but its FMCG and cotton business are still in the recovery process.
Mr Davenish said lack of adequate working capital had been the major const- raint.
He added that over the past three years, only US$3,6 million has been pumped into Olivine Industries.
Group seed production grew 35 percent to 44 842 tonnes from the prior year period while maize seed production grew 38 percent.