Food concern, starafrica corporation, narrowed its losses by 59,71% to $1,34 million in the half year ended September 30 on the back of changes to its operational strategy that saw improved revenues.
BY TATIRA ZWINOIRA
In the same period last year, the company registered a loss of $3,33 million.
Revenue for the period under review improved by 62,48% to $23,16 million from $14,25 million registered in the same period last year.
This was on the back of the group’s sugar sales, in terms of volumes, increasing by 70% to 30 238 tonnes from 17 740 in prior year over the comparative period.
In a statement accompanying the results last week, starafrica corporation chairperson, Joe Mutizwa said the earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to $1,9 million, which was better than the $1,6 million achieved in the whole of 2016.
“The (EBITDA) amounted to $1,9 million, which is not only better than a negative of $300 000 in prior year but is even higher than the full year EBITDA of $1,6 million achieved last year. The strong performance is on the back of continued optimisation of post upgrade efficiencies, improvements in quality and quantity, cost containment strategies and positive effects of working capital accessed as part of the secondary scheme,” he said.
“Improving operational profitability is, however, dampened by finance costs, which almost entirely relate to the legacy debt. The interest for the half year totalled $3,1 million and was, thus, greater than the EBITDA, thereby, sliding the company into a loss before tax of $1,3 million against a comparative loss before tax of $3,3 million for the same period last year.”
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Mutizwa said the EBITDA was affected by the squeeze on margins from decreasing selling prices, which resulted in the earnings not being sufficient to fully cover the finance charges.
“Efforts to mitigate this situation are more fully described under the Scheme of Arrangement commentary,” he said.
The scheme involves starafricacorporation discussing with creditors to turn amounts owed into equity, which is envisioned to give a fuller and quicker recovery.
Looking at the state of starafrica corporation’s ability to service its obligations and general liquidity, the sugar processing company will continue to struggle to service its debt, as it only had 64 cents to pay for every dollar at the end of the period.
This was not helped by the company’s net cash flow being down 42,45% to $277 226 from a last year’s comparative of $481 760. Total assets grew to $47,06 million from a 2016 comparative of $43,55 million but this was offset by the fact that total liabilities outpaced the assets by 89,93%.
Mutizwa said given that the company had established capacity beyond local demand and quality that meets international standards, focus would now be on creating an export platform into the region and beyond.
