SUGAR manufacturer starafricacorporation reported profit before tax of $0,5 million in the six months to September from a loss position of $1,3 million in the prior year, driven by a reduction in costs and interest burden following the conversion of debt to equity by creditors.
By freeman Makopa
The profit was the first for the company since adoption of the multi-currency regime in 2009.
The company has been struggling to stay afloat and is only starting to come out of the woods after undertaking a secondary scheme of arrangement which has allowed it some breathing room.
Production of refined sugar was up 15% from 31 023 tonnes in the same period last year to 35 791 tonnes this year.
The group’s sales in terms of volumes increased by 18% from 30 328 tonnes in prior year to 35 697 tonnes in the half year under review. The increase in volumes also resulted in turnover increasing by 21% from $23,2 million in the same period last year to $27,9 million in the period under review. Earnings before income tax, depreciation and amortisation (Ebitda) increased by 13% to $2,1 million.
“The company continues to implement the secondary scheme deliverables, and the move to engage scheme creditors to exercise their debt to equity conversion options yielded positive results whereby debt worth a cumulative $47,4 million had been converted up to September 30. The conversion represents 72% of the principal scheme debt which had conversion options,” said company chairman Joe Mutizwa in a statement accompanying company results on Wednesday.
“Management continues to engage the remaining creditors, with special emphasis on four creditors who constitute over 70% of the remaining convertible debt. The prospects of success vary among the parties but management is confident of striking an agreement with at least two of the four major creditors within the second half of the current financial year”.
In May, a special purpose vehicle established by government to buy non-performing loans from banks and clean their balance sheets, Zamco, took up a 58% shareholding in starafricacorporation after it assumed the company’s $32 million debt.
State-owned pension scheme National Social Security Authority (NSSA) is the second largest shareholder, with a 20% stake.
The group says it is negotiating with creditors who are mostly statutory entities for extended settlement terms to resolve a $7 million net current liability position.
Mutizwa said the sugar industry’s capacity is more than adequate for both national and export requirements.
“Despite the austerity measures introduced in the 2019 National Budget, the outlook for the company is positive, given the significant progress made to date on restructuring the balance sheet, rebuilding volumes and streamlining costs”.
“The focus going forward is to further reduce the debt burden, improve plant availability and ramp up exports. The path to sustainable profitability needs to be further entrenched over the next twelve to eighteen months”.
The board did not declare a dividend.