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Executive Chat: Padenga set for crocodile farming summit

PADENGA is the latest company to list on the Zimbabwe Stock Exchange, having done so in December last year. The company listed at US$5c per share and more than two million shares worth US$138 000 changed hands on its first day of trade.

The company emerged from a decision by Innscor Africa to unbundle its crocodile skins division, Niloticus. CEO Gary Sharp (GS) talks to the Zimbabwe Independent Chief Business Reporter Paul Nyakazeya (PN) about the company’s operations and future plans.

PN: The name Padenga is a Shona word that refers to or describes a high point, a desired position or a place of comfort and authority, how does it fit into the company’s vision?

GS: Padenga symbolises our vision to be the best Nile crocodile farmers in the world. We intend to stay at the top by continuously improving on the quality of skins we deliver to the market. Quality skin production is a process not an event and that offers continued opportunities to fine tune what we do in an effort to produce blemish free skins.

PN: How did the company emerge?

GS: The company emerged from the Niloticus Division of Innscor Africa Limited. The Niloticus Division was incorporated into Innscor Africa Limited on its listing in 1998. The two farms that made up the division then, Kariba Crocodile Farm and Ume Crocodile Farm, were established in 1965 and 1973 respectively. Nyanyana Crocodile Farm was built during the years 2005 to 2009. The farms were each designed to produce 20 000 skins annually, now scaled back to 14 000 skins each on the premise that larger premium quality skins will result from the destocking exercise.

PN: In the region what are the top five Niloticus producing countries?

GS: They are Zimbabwe, South Africa, Zambia, Mozambique and Kenya.

PN: At the launch of the company, it was obvious that Padenga’s total grower space in m2 has been increasing from 2001 to 2010, why is that?

GS: It has been our strategy for some years now to improve on quality by reducing our stocking densities. This is reflected in the stats you refer to, accelerated particularly by the construction of Nyanyana Farm which commenced in 2005.

PN: What is the average crocodile skin price per cm?

GS: Skin price is a function of size so this needs a little bit of qualification. We are targeting around US$9 a centimetre for skins of 40cm width in 2011 with the probability of some value added advantage on top of that.

PN: What is the value of crocodile skins sold per annum over the past three years and your projections in 2011?

GS: For year ending 2008 it was US$11 795 720; 2009 – US$10 219 844; 2010 – US$11 775 217 and forecast for 2011 is US$19 775 272.

PN: Can you give us insights into the leading tanneries in the world?

GS: There are effectively 11 major tannery groups worldwide handling the majority of crocodile skins traded. Some of these are directly owned by Luxury Brand houses, others are independent. Producers sell to these relatively few tanneries who in turn sell on to a huge variety of high, middle and low end manufacturers worldwide.

PN: Who are Padenga’s major customers?

GS: TCIM, a French tannery and Heng Long Leather, a tannery based in Singapore.

PN: The crocodile skin is synonymous with luxury, I understand you have hand bags that cost as much as US$140 000 and hoodie jackets for US$75 000. Do you have any names of celebrities or executives worldwide who have purchased any of these two items?

GS: Let’s be clear here. We as a producer sell skins to the tanneries that in turn process and finish the skin in a manner that allows it to be used to manufacture very expensive handbags and fashion accessories. These skins are then sold by the tanneries to the fashion and luxury brands. The handbags we had on display at our launch were such examples manufactured by a leading French luxury brand. Their products retail at the price levels you refer to. The rich and famous are traditionally the owners of such items, and include Victoria Beckham and Pharrel Williams.

PN: What makes a quality crocodile skin?

GS: A quality crocodile skin has to be blemish-free it should not have any scars, holes or any marks from skin diseases.

PN: Padenga achieved revenues amounting to US$11,7 million for year ending June 30 last year, what figures are you working on for the year ending June 2011?

GS: Our target turnover is US$19 775 272

PN: What were some of the salient features of your incomes statement during the same period?

GS: We achieved a turnover of US$11,8million based on the sale of 49 168 skins, prices attained were low due to the effects of the global financial crisis. We held back 16 362 skins available for sale due to low prices prevailing then. These skins were sold subsequent to year-end for US$4 million. Cash expenses were within 10% of budget in the first full year of dollarised trading. There was significant growth in Earnings Before Interest, Taxes, Depreciation and Amortisation from US$70 000 in prior year to US$1,3 million. During the period under review a fair value adjustment loss of US$1 million from the down-scaling exercise was achieved and interest charge of US$632 000 arising from delayed culling recorded.

PN: You listed on the Zimbabwe Stock Exchange in December last year. How would you describe your operations as a public listed company?
GS: We are always in the public eye and everything we do must stand up to public scrutiny. We intend to meet every projection we give to the market.

PN: And your comment of the current share price and what lies ahead?

GS: The current share price is fair because we are currently an unknown entity. The current price places us on a forward price earnings ratio of 5,6. Our peers are trading at an average price earnings ratio of 10. We therefore expect significant growth when we deliver our first full year results to the market and move closer to what we estimate the average price earnings ratio for the industry to be.
PN: Who is Gary Sharp and what inspires and motivates you?

GS: I am a home-grown Zimbabwean, born, raised and educated locally. I thrive on a challenge; love breaking new ground and implementing concepts and operational strategies never achieved within our industry before. I enjoy coordinating the efforts of an outstanding management team and directing them to new heights and new successes. This teamwork has been the strength of our business to-date and being surrounded by people with such determination and passion is highly motivating.

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