Aico US$50m rights issue put on hold

on hold as major shareholders feared dilution, opting to invest elsewhere.
“Major shareholders decided that we should not do the rights issue because they would be diluted. We were held back on that,” said Mr Devenish at the Imara Conference in Harare yesterday.

“We should come up with a capital-raising initiative in the next three or four months.”
The Aico share price has remained weak as the deadlock of arrangement for possible capital injection reduced investors’ appetite for the stock.
The proposed fund-raising is expected to expunge debt and necessitate the restructuring of Aico’s loans.
The group is under pressure to deal with an estimated US$35 million Cottco debt and an additional US$16 million Olivine Industries debt.

Initially, Cottco’s debt was US$50 million and had managed to deal with the other US$15 million.
Mr Devenish said there was no plan in sight to clear the debt — until the conglomerate gets funding from shareholders.
In its analysis, Imara said the group still had its invaluable business portfolio and through the “cash cow” Seed Co and the upcoming Cottco debt restructuring the group was likely to improve as the debt issue is addressed.

Aico has a volatile earnings stream due to the seasonal variability of dry land cotton production and unpredictable lint prices on world commodity markets.
The conglomerate is in the process of offloading its 75 percent shareholding in subsidiary, Scottco and the entire loss-making frozen vegetable arm, Exhort.

It is understood the sale of Exhort is nearing completion while Scottco’s disposal has remained problematic and is likely to be closed.
From Its disposals Aico was targeting US$8 million that could be used to recapitalise Olivine Industries.

Going forward, management is anticipating a marginal increase in group sales for the full year 2012, mainly impacted by the fast moving consumer goods business.

The cotton and seed businesses are expected to post significant earnings growth. Recoveries in the cotton business for the out grower scheme recovered to average 90 percent.