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AICO Africa Limited has written down a total of 30,2 million from the value of two of its units to reflect the decrease in their carrying amounts after a poor financial performance in the interim period to 30 September 2013. The reduction in the value of subsidiaries Cotton Company of Zimbabwe and Olivine Industries by $24,6 million and $5,6 million, respectively, also reflects the funding crisis that has hit the two companies.
Cottco is borrowed to the tune of $80 million and has been unable to service its debts. Refinancing the debt at intervals and haemorrhage from finance costs have affected its capacity to optimally carry its business.
On the other hand, Olivine Industries also faces serious working capital and capital funding deficiencies and requires about $25 million fresh funding to retool in order to improve its production efficiencies.
Cottco plunged to a $16,2 million loss before tax while Olivine recorded $1,3 million loss before tax, seed business $13,7 million as the three units combined to consign AICO to a $29 million loss.
“Following the poor performance the Cotton Company of Zimbabwe and Olivine Holdings, after the balance sheet date, the directors of the company have impaired the investments in these units,” AICO said in a statement.
AICO said Cottco’s operations have been negatively affected by lower seed cotton intake volumes, whereas lack of adequate working capital continues to hamper performance and recovery in Olivine Holdings Limited.
Group sales volumes of 36 094t were 23 percent below the prior comparative period, consequently group revenue fell 6 percent to $51 million.
Operating loss came in at $17,1 million, 6 percent below the same period last year while after tax loss improved marginally to $27 million.
Seed cotton crop volume intake fell by 34 500 tonnes driven by low national crop size while market share dropped by 24 percent to 18 percent. Ongoing funding initiatives will be critical in revitalising the business.
The first six months saw encouraging results for the seed business with volumes increasing by 17 percent on prior year while winter cereal sales rose by 34 percent over prior year with earnings seen ahead of last year.
The fast moving consumer goods business, which is predominantly Olivine, was affected by working capital constraints, but improvements have been noted in efficiencies with volumes 57 percent higher than 2012.
AICO is working on collapsing the group holding structure in what will result in three independent businesses after the unbundling of the group.
Ongoing fundraising initiatives will see the proceeds being directed mainly into the The Cotton Company of Zimbabwe to turnaround its fortunes.
Online Reporter