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Rumbidzayi Zinyuke Business Reporter
AICO Africa Limited has projected a significant loss for the year ended March 31 2014 largely weighed down by low intake volumes at its cotton small business unit, Cottco. The company said it was apparent that the level of cotton production this year was much lower than prior years as the cotton buying season comes to an end.
“As a result intake volumes in our cotton small business unit are significantly lower than last year. Accordingly, Aico will post a loss for the year to March 31, 2014 that is substantially higher than the loss recorded in the year to March 2013,” the company said.
Last year, Aico recorded a loss of US$2,4 million, in the full year to March, as earnings went on a downward trend as the seed business performed poorly and a loss was recorded at the FMCG concern exacerbated by a free fall in international cotton prices. A sharp decline in local cotton output has been projected for this year while concerns abound that crop funding for the next season may be lower than the previous year.
Preliminary figures obtained from the Cotton Ginners’ Association indicated that cotton output could be as low as 145 000 tonnes, from the initial forecast of 250 000 tonnes. This would be 58 percent lower than the 2011/12 production of 347 000 tonnes.
The CGA said lower output was due to poor “grower viability” which resulted in poor harvests while an estimated 30 000 tonnes are suspected to have been lost through side marketing. About 98 percent of cotton is grown under contract schemes. The schemes were introduced when farmers were failing to access finance from the banks due to lack of collateral.
Cotton growers exhibiting at the Harare Agricultural Show last week said they had suspended production until prices become favourable. The farmers said they had incurred huge losses during the just-ended marketing season even though buyers kept on increasing producer prices. Aico, however, said the group was working on finding ways to reverse the situation and return to profitability.
“The directors of both Aico and Cottco are engaged in identifying and mapping ways to contain the impact of this phenomenon as well as to come out of this difficult situation and will provide updates in due course,” AICO said in a statement.
To that end, Aico Africa said it was in the process of finalising capital raising projects and other disposals that will inject funds into cotton in a bid to boost its fortunes. Aico owns 100 percent stake in the Cotton Company of Zimbabwe, 50,2 percent in Seed Co and 49 percent in Olivine Industries. In 2011, the group shelved its
proposed US$50 million rights issue which was expected to recapitalise its subsidiaries and retire a huge debt.
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