adminHowever, he did not disclose specifics of the deal citing confidentiality aspects of the deal. But the transaction will require an EGM for approval due to its “size, scope and structure”.
“We have now found a suitor for our miling division (Victoria Foods) whose offer, and the structure of such an offer, has been approved by the CFI board,” said Mr Kuipa. “We are now engaged in the regulatory and compliance processes required by both the suitor and various intuitions in Zimbabwe.”
Victoria Foods is regaining its feet after the injection of US$1,7 million secured from the PTA Bank. Milling efficiencies have improved while margins on snacks and down-packed products have been enhanced, said Mr Kuipa.
On the recapitalisation of the poultry division, Mr Kuipa said this had been “subdued” due to the absence of long-term tenure on its agricultural land.
But he said the group was in talks with a potential investor for a joint venture on one of its poultry divisions. Poultry businesses that are operated by CFI are Suncrest Chickens, Hubbard Zimbabwe and Crest Breeders.
“We believe this proposed transaction will help us address some of the bottlenecks and inefficiencies imposed by the aged infrastructure,” said Mr Kuipa.
He said the Victoria Foods and the poultry deals would be completed with three to four months. Challenges in recapitalising the group have restricted the turnaround of the company.
The group’s revenue for the year ended September 30, 2012 declined six percent to US$92,4 million from US$98 million a year earlier. This was due to inadequate working capital, mainly in poultry and specialised division.
Poultry contributed 52 percent of the total revenue, six percent up from the prior year. The specialised division contributed 13 percent, a decline from 24 percent in the previous comparable period while the retail division contributed 35 percent.
Loss for the period came in at US$3,4 million against US$4,5 million a year ago.
During the period, the company invested US$5 million towards construction of environmentally-controlled poultry houses at Glenara Estates, a water purification plant and reservoir at Crest Breeders and the refurbishment of the milling plant.
The favourable impact of this investment would be felt in the current financial period.
Mr Kuipa said tight liquidity conditions in the market had hampered efforts to sell some of its non-core assets which include a 14 percent stake in Windmill and a property in the retail division, which should see the group raise US$1,4 million.
Giving an overview of the business performance since November 2012, Mr Kuipa said demand for poultry-related products has remained “very firm”, but the group was struggling to meet demand for dressed chickens, table eggs and stock feeds.
The retail division had a good first quarter performance, underpinned by surging volumes in agro inputs sales. Rental income declined due to liquidation of Afro Foods but the group was in the process of finding new tenants.
The specialised division volumes were subdued in the first five months to February 28 this year owing to recapitalisation challenges. Revenue for the same period fell 7 percent to US$42,4 million while margins increased by 3,4 percent.
Expenses declined by 11 percent on the previous year due to a combination of decline in volumes and cost containment measures.
Online Reporter