ZIMBABWE Stock Exchange-listed Colcom Holdings has invested $1,5 million in new factory equipment as the company seeks to improve operating efficiencies and revenue, a company official has said.
Tarisai Mandizha, Business Reporter
The new plant will be commissioned in January 2014.
Speaking at the group’s annual general meeting on Friday, Colcom chief executive officer Theophilus Kumalo said the funding for the plant will come from borrowings and the companies’ resources.
“Aged equipment is eroding the company’s efficiency and has resulted in high maintenance costs. Consequently, we have purchased a new emulsification line, smoking, cooking and cooling equipment and a packaging line at a cost of $1,478 million,” Kumalo said.
According to the Confederation of Zimbabwe Industries, most companies have struggled due to capital use which has resulted in the use of antiquated equipment with high overheads.
The equipment, according to Kumalo, will improve production of smoked and cooked products to an excess of 200 tonnes per week.
He said the market demand was significantly below production capacity and the factory was currently operating at 66% capacity.
“We commissioned a refurbished 8 tonne-boiler and steam production has been stabilised. This installation has resulted in reduced coal consumption from 8 to 5 tonnes per day,” he said.
Kumalo said the group turnover increased by 14% for the first four months from July to October as compared to the same period last year due to growth driven by wider distribution channels.
Kumalo said turnover for the Colcom Foods Division which includes Triple C, pigs and the pies business declined by 10% as compared to prior year due to the discontinuation of frozen pies and the reduced production tonnage of pork pies and low cost sausages.
“Gross profit margins continue to be squeezed by the requirement to heavily discount sales across all product lines into the market and the inability to pass on these raw material cost increases to our customers, due to depressed market conditions,” Kumalo said.
“We expect that the trend of volumes and turnover growth will continue at about 14% over prior year and that profitability will be enhanced by managing all operational costs downwards in an environment of declining margins.”
He said currently most categories of protein were in an oversupply resulting in low margins.
“With the stiff competition and market resistance to pricing, we reduced the producer pig price significantly and this has eroded the Triple c farm profitably to breakeven levels,” Kumalo said.