SUGAR producer starafricacorporation suffered a 723% decline in operating profit for the six months ended September 30, 2023 due to reduced sales volumes and a rise in operating costs in real terms.
In a statement accompanying the company’s financial results for the half year ended September 30, 2023, group chairperson Rungamo Mbire said operating profit receded by 723% to negative ZWL$29,45 billion, from ZWL$4,73 billion in the prior year.
However, revenue increased by 35% to ZWL$99,41 billion. In historical terms, revenue increased by 382% to ZWL$76,20 billion, while operating profit decreased by 432% to negative ZWL$10,64 billion.
“Since the promulgation of SI 80 of 2023, cheaper imported brands of sugar have flooded the local market, resulting in reduced demand for locally-produced sugar. This has negatively affected the industry’s ability to meet its working capital requirements,” Mbire said.
“Goldstar Sugars (GSS) experienced a 41% decrease in sales volumes of granulated sugar compared to the same period in the previous year, the decline was mainly due to depressed demand caused by the influx of cheaper sugar imports, after the suspension of duty on basic commodities.”
Mbire said the 2024 national budget outlined a proposal to reinstate the suspended duty on basic commodities from January 31, 2024.
He said the removal of sugar from duty-free imports would positively impact the local sugar industry, preserve local jobs and ensure Zimbabwe continued to retain the much-needed foreign currency for the development of our economy.
Mbire said the GSS also experienced low sales volumes for the period under review due to its closure for three months owing to an increase in prices for raw sugar from its sole local supplier.
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“Additionally, the refinery was closed for three months from July to September 2023 owing to relative upward price adjustments by the sole local supplier, which made the business’ products uncompetitive relative to imports. However, the pricing issues were resolved with the raw sugar supplier at the end of September 2023,” he said.
Country Choice Foods was also negatively impacted by the price increase of raw sugar, resulting in it experiencing a sales volume decrease of 46% due to the erratic supply of raw materials from GSS.
The company imported part of its raw sugar requirements from Zambia, while negotiations were underway with the local supplier and the price issue was resolved at the end of September.
Despite the challenges faced during the period under review, the company implemented measures aimed at ensuring a return to profitability and positive cashflow generation, Mbire indicated.
“Management has assessed the group’s going concern position by considering the current trading activities, financial position and projected requirements,” he said.
“The industry has sufficient production capacity and capability to avail good quality sugar in sufficient quantities to meet the country’s requirements. The company looks forward to seeing a performance improvement soon.”
Revenue for the property business improved significantly with ZWL$650,49 million of rental income being recorded compared to ZWL$352,42 million during the same period in the prior year.
Tongaat Hullet Botswana, which is an associate of the company recorded a profit of ZWL$2,65 billion.