At the group’s AGM last Friday, Sithole, without giving figures, said the group’s turnover had been affected by Red Star’s depressed performance due to under-capitalisation.
“All units with the exception of Red Star had shown improvements,” Sithole said. “Margins were not as good, with Sugar at 10-15%, Trading 9-10% and Packaging slightly higher.”
Red Star has warned its shareholders of a depressed financial performance for the fiscal year ending March 31, 2010.
Sithole said Red Star had managed to bring down the average costs of borrowings to 10% from a high of 42% buoyed by funds from a US$20 million rights issue.
About US$4, 5 million was spent on re-equipping plant and machinery, while the rest went towards working capital.
In a notice to shareholders, the firm said current financial performance of the company reflects an attributable loss and negative shareholder equity.
“Pursuant to the above, the directors of the company are currently assessing a potential transaction and recapitalisation of the company. Shareholders are advised to exercise caution in dealing with Red Star shares,” said the company.
Red Star, which comprises of Red Star Wholesalers, Advance Wholesalers and R Chitrin Wholesales, is owned 66,3% by Starafrica Corporation, under its wholesale and retail business units.
Red Star was targeting to reach 70% capacity utilisation by end of the financial year to March 31, 2010.
“Volumes had improved as a result with Gold Star (Harare) up 30%, Polyfilm 22% and Blue Star and ZSR Transport up 94%,” Sithole said
Sithole said Gold Star Bulawayo was reopened in July— seven months after it was shut down.
Sithole said raw sugar requirements would be met as sugar production had increased by 80 000 tonnes. The group expects to produce 120 000 tonnes.
The group had seen an improvement in the quality of sugar. In May they switched to VHP raw sugar which has lower colour specks. Sithole said they had resumed supplying bottler grade sugar to beverage companies after last year’s slump.
“UB has an order for 200 tonnes per week and Schweppes has also come on board,” he said.
A coal extruder had been commissioned at Polyfilm, while new rigs would be commissioned at Blue Star and ZSR, which would see capacity doubling. Sithole said Blue Star had long term contracts on its books.
“Red Star was 60% stocked from 35% at year end and the group hopes to achieve a break-even position by year end,” he said.