Diversified agro-industrial conglomerate Aico Africa Limited (Aico) on Tuesday said the group has agreed to inject $15 million towards the revival of Olivine Industries.
Speaking at the company’s analyst briefing for the year ending March 31 2011, Aico group chief executive officer, Patrick Devenish said stakeholders had agreed to put in the required capital, starting with a total $10 million that was injected in June 2011.
A further $5 million will be injected by the end of July this year “This money will be used for working capital purpose (mostly raw material) and to restructure short-term debt,” said Devenish
He said Olivine continues to suffer from liquidity and working capital constraints and this has resulted in low production and stagnant growth
“Olivine Industries need about $25 million for rehabilitation of old plant equipment and the group is still looking for this funding,” said Devenish
Devenish said the anticipated injection of capital into Olivine would turn business around while buttressing overall growth in performance of the group.
He said Olivine produces superior export products as compared to imported substitutes in product range such as margarine and cooking oils.
“Olivine has a strong reputation for quality. The company exports to Botswana, Zambia, Malawi and Mozambique and has good prospects in East Africa and DRC” he explained.
The group financial performance has improved significantly, contributed by $13,5 million turn around in cotton and 30% growth in seed.
The group revenue of $210 637 grew by 29% for the year ended March 31 2011 from 162 879 on the previous year on account of firmer commodity and sales prices throughout.
FMCG discontinued operations which recorded losses of $4,5 million and $1,1 million respectively.
Aico group finance director, Bernard Mudzimuirema, said Cottco, which is the flagship of the conglomerate, has improved to 268 000 tonnes from 210 000 last year and cotton intake volumes also improved to 111 075 tonnes compared to the previous years.
“Cottco invested $11,7 million in crop inputs during the year and this should result in higher crop intake volumes as indications on the ground suggest,” Mudzimuirema
SeedCo sales volumes increased across all the seed business units resulting in a growth in overall sales volume of 15%. In-revenue of $98 million was 27% higher than last year
“Maize and cotton were the biggest contributor to this growth,” Mudzimuirema said
Aggregated group sales volumes fell by 2% to 190 150 tonnes due to low carryover stocks in cotton and stagnation in FMCG volumes.
“Group margins improved throughout the group, resulting in composite gross margins of 41% from 33% last year while trading profit margins rose to 16% from 8% last year as a result,” said Mudzimuirema.
Group profit from operations of $33,2 million grew 160% over the previous year, profit before tax rose by 311% to $20 million after charging interest of $17,2 million.
The group net profit from continuing operations of $18,6 million was 309% higher than the previous year. Devenish said Aico Africa will soon be disposing two of its subsidiaries, Scottco and Exhort, to concentrate on core business.
The two businesses no longer suited the group’s business model going forward.
Aico acquired Scottco, a cotton spinning company and Exhort, an exporter of frozen vegetables, during the Zimbabwe dollar era for value addition.
“These are profitable businesses but as the group positions itself for the future, they do not suit the business model,” said Devenish.