Colcom interim profit plunges

Business Reporter
COLCOM Holdings Limited had a disappointing first half after profit plunged 66,2 percent to US$1,6 million in the interim to June 2013, weighed down by cost of provisions and impairment of fixed assets. Against this background basic earnings per share fell from US2,87c to US0,87c while headline earnings per share also declined by a lower rate from US2,82c to US1,88c.

Chairman Robert Davenport said the factors that weighed down on operations were a result of a compromised governance environment as well as a number of equipment failures, which either had to be provided for or impaired.

Impairment refers to an accounting policy where a company writes down the value of an asset deemed irrecoverable while provisions are expenses, allowable in accounting practice, in the form of an amount set aside for the probable, but uncertain, economic obligations of an enterprise

Colcom said in addition to the provisions of US$1,3 million reported in the first half of the year, a further US$1,1 million of cost of provisions were processed in the second half.

The meat processor said these emanated mainly from stock and retrenchment costs. A critical review of the group’s assets resulted in impairment and de-cognition of charge of US$1,5 million and these factors contributed to profit before tax reflecting 65 percent decline.

“In spite of the above the group generated US$3,7 million from operations and remains cash positive after investing US$2,8 million in fixed assets during the year, primarily directed towards back-up generator power and new retail space for Colcom operations and those of its subsidiary Associated Meat Packers (Private) Limited,” Mr Davenport said.

Going forward, he said the challenges of an ageing facility has been addressed in part by committing to and contracting of US$1,4 million of factory equipment to be installed by December.

The company expects that the equipment will provide enough emulsification, cooking, cooling and packaging to produce the appropriate quantity and quality product for the market.

The Zimbabwe Stock Exchange-listed firm said a further commitment to modernise the Colcom pie facility has been made with investigations into the plant make up in the final stages.

Mr Davenport said the group will continue to invest in maintaining infrastructure to supply quality water, steam and refrigeration required to support the operation while investigations continue on how the company can invest in modernising the facility are advanced.

He said management has made decisions to ensure that Colcom carries forward quality assets on the balance sheet and holds a clear commitment to achieve objectives in its revised strategy.

The Innscor Africa subsidiary said profits for the six-month interim plunged despite revenue surging to US$60,7 million from US$52,8 million in last year’s comparative period.

Operationally, Colcom said its Tripple C Pigs division delivered 57 646 pigs during the year, representing 4 490 tonnes of raw input product, which was 6 percent above prior year.

The Colcom factory suffered a 5 percent drop in volumes processed over prior year due to equipment failure while increased operating costs and ageing equipment also affected operations.

Colcom pie production increased by 38 percent over the prior year albeit at a cost of margin and additional overheads. A number of product lines have been revamped to improve quality.

The group’s subsidiary, Associated Meat Packers, achieved volume growth of 57 percent over previous comparative period, which translates to 16 percent growth in profit, but this was diluted by pre-operating costs incurred in expanding the its retail footprint.

Total assets increased to US$37,2 million from US$35,7 million in the prior comparative period. Current assets stood at US$18,8 million and current liabilities totalled US$7,6 million.