HomeBusiness DigestCottco unlikely to meet profit target

Cottco unlikely to meet profit target

Roadwin Chirara

THE Cotton Company of Zimbabwe (Cottco) says it is unlikely to meet its projected profits for the year to March 31 due to depressed international lint prices, an overvalued local currency and

high inflation.


Jonas Chindanya, Cottco’s acting company secretary, said on Wednesday that punitive interest rates and delays in accessing credit lines to boost operations had negatively impacted on the company’s bottomline.


“The company advises shareholders that challenges in respect of weak international lint prices, high domestic inflation and interest rates, a relative static exchange rate and delays in securing cheaper foreign lines of credit… have impacted negatively on the group’s financial performance,” he said in a profit-warning statement this week.


Chindanya said profits for both the first and second half of the year to March 31 had been impaired by these operational challenges.


Cottco, listed on the Zimbabwe Stock Exchange and a successor company to the former Cotton Marketing Board, is a net exporter heavily reliant on good export prices.


The fall in Cottco’s earnings come after the Commercial Cotton Growers Association also projected a decline in cotton output of 31 % for the 2004/5 season.


The association said cotton output would fall from 331 000 tonnes in the 2003/4 season to 228 000 in 2004/5 due to lack of fertilisers, tillage and chemicals, coupled with poor rainfall.


In 2004, inflows to the Reserve Bank of Zimbabwe from cotton were US$117,3 million and actual shipments and free funds were US$134,5 million.


This year’s crop has been projected to contribute US$162 million in export revenue.


Mali, Africa’s largest producer of cotton, is expected to produce about 600 000 tonnes of cotton in 2004/5 season, while Burkina Faso, Chad, Nigeria and Benin are also expected to record increased output favoured by good rainfall patterns.


Elsewhere, the International Cotton Advisory Services anticipates world cotton output to be 23,1 million tonnes for the 2004/5 season, with China accounting for 25% of total output.


World cotton consumption is expected to reach 21,6 million in the 2004/5 season, leaving a surplus of 1,5 million tonnes.


Consequently, cotton stocks are expected to increase from seven million tonnes in the 2003/4 season to about nine million in the 2004/5 season, a development that will have negative effects on international cotton prices.

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