Cottco Holdings targets profitability on improved volumes
COTTCO Holdings says is targeting 100 000 hectares of seed cotton in the current planting season but that will heavily depend on inputs that government will avail ahead of its proposed takeover of the company through a debt/equity swap scheme.
In a trading update at the company’s AGM on Wednesday, acting managing director Chris Murove said financial advisors to the transaction are finalising a circular to shareholders before calling for an EGM to approve the scheme.
“We are targeting 100 000 ha of seed cotton in the current season. Under a new arrangement, Cottco has been using its own data base to register the farmers in partnership with Agritex,” he said.
Government, through the National Social Security Authority (NSSA) already holds about 22 percent in Cottco and the takeover of the US$56 million debt will result in the government acquiring a majority shareholding in COTTCO.
Murove said negotiations to secure an agreement on the amounts owed and the issue of treasury bills between the Zimbabwe Asset Management Company (ZAMCO) and the company’s bank creditors are almost complete.
In terms of the just ended cotton buying season, Murove said Cottco suffered a reduction in intake volumes to 30 000 tonnes compared to 43 697 tonnes in the previous season.
Intake from the industry perspective also declined to 90 000 tonnes down from 135 000 tonnes realised in the previous year.
Murove said the slump in cotton production was mainly driven by the failure of the entire industry in providing adequate and timely funding for cotton growing inputs, which resulted in lower yields.
“The poor rainfall patterns across the sub region also worsened the situation,” he said.
The acting MD also said that, Cottco is now at the tail end of ginning, with the process having taken long due to erratic power supplies and other economic factors.
“The buying of cotton was well organised and managed by the Cotton Ginners Association under the supervision of the Agricultural Marketing Authority and the process eliminated the perennial problems of side marketing,” he said.
The company also said in preparation for government takeover, it is finalising a staff rationalisation exercise, as well as the right sizing of the business with the focus now on deploying personnel with necessary skills to fill up the approved new company look.
Murove said the group has embarked on a turnaround strategy whose thrust is to upscale production volumes in the coming season, consolidate cost cutting measures undertaken to date and return the business to profitability.
“Our focus is to transform Cottco into a viable business venture so that is reverts to its pole position as the market leader in the cotton industry in Zimbabwe,” he said.
At the AGM, directors fees were approved at US$134 241 while auditors fees at US$10 000. FinX
Follow us on Twitter on @FingazLive and on Facebook – The Financial Gazette