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Dollarisation revives listed companies’ operations

ANNUAL general meetings so far held this month have revealed that the dollarisation of the economy has revived a number of listed companies’ operations.


Redstar recorded earnings that are more than what the company earned in its last financial year end in four months whilst Seed-Co revised its targets as its market-share continued to increase.

 

At an AGM held last week, Redstar Chief Executive Officer Denford Mberi told shareholders that Red Star’s revenue for the four months to July amounted to US$13 million.

This is much higher than the US$10,9 million the group had realised in financial year ended March 31 2009.

In mid-July, the group managed to secure offshore funding of US$3 million at 3,25% per month for one year which Mberi said the group was using to “play catch up” in order to meet targets.

Of the amount US$600 000 of that was likely to be used to ramp up Zambian operations. The strategy in Zambia had also changed with product supply now coming from South Africa as Zimbabwean products were relatively more expensive.

Shareholders also gave the group the go-ahead to raise US$15 million for restocking.

An EGM held in June had approved the borrowing of US$10 million and chairman Pattison Sithole said the revised capital would push capacity utilisation to 70% this year against an initially targeted 60%.

Capacity utilisation currently stands at 33%. Shop floor space currently stands at 50 366 square metres from a branch network of 44.

Mberi however noted that eight Red Star branches were still closed. Product supply was at 49% with imports making up 55% and local 45%.

Trading terms from suppliers were between seven and 21 days and seven to 14 days with customers. Gross margins were at 13% and the business was just about breaking even. The company’s share price has however not been as attractive as other counters.

At Seed-Co’s AGM Chief Executive Officer Pat Devenish told shareholders that the agricultural inputs company was targeting 50 000 tonnes of seed in production and sales this year. The group is targeting 30 000 tonnes from local operations and 20 000 from foreign operations. Zimbabwe requires 35 000 tonnes annually.

Using the group’s management guidance of sales volumes of 50 million kg, analysts expect Seed Co to sell its seed for an average if US$1,3 per kg compared to a retail price of about US$2 per kg.

A turnover of about US$65 million is therefore expected across the group. Analysts also project a profit margin of 20% resulting in a bottom line of US$13 million. This means earning per share would be around US65c. The counter which is currently hovering between US65c and 75c is said to be a strong buy at it is projected to reach US$2 before the start of the farming season.

Seed-Co is the largest grain seed producer in Zimbabwe and the holding company of local seed producer Quton Seed Company.

The group’s market share currently stands at 52% in Zambia, 57% in Malawi and 69% for Zimbabwe. Market share in Zimbabwe was expanding. Regionally the group was currently working on a cotton project in Tanzania, seed projects in Angola and Mozambique and “some work in Ethiopia”.  

Devenish said the group was in the last stages of finalising their exit from Mozambique but they had taken on a project on a consultancy basis “and therefore there is no financial risk”.

The Angola project follows the government’s strong thrust on agriculture in a bid to take dependency away from oil. The project will thus be a joint venture with the government. Seed Co has operations in Zambia and Malawi. It has sales offices spread across the region, including Tanzania, the DRC, Angola, Mozambique, Botswana and Swaziland.

AGMs scheduled for this month are for AICO today, National Tyre Service (August 18), Tedco (August 20), Dawn Properties (August 26) and PG Industries on August 27.

Paul Nyakazeya

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