CAIRNS Holdings Ltd reported an accelerated loss of US$1,6 million in the six months to February 29 2012, driven by a sharp increase in finance costs, a development likely to compromise the group’s strategy to return to profitability.
The company’s loss position increased by 25%, up from the US$1,2 million recorded in the same period the previous year, largely due to finance costs which rose to US$1,3 million, representing 18% of turnover.
In a statement attached to the group’s financial results, company secretary Jeremiah Kwenda said the worsened loss position was also attributable to a 12% increase in the tax burden in the period.
Group turnover dropped 32% to US$7,4 million due to depressed volumes at Cairns Foods, whose contribution to group turnover was 96% or US$7,1 million.
However, the company’s problems were worsened by the lack of activity at ME Charhorns, which the company recently took over for a consideration of US$1 million.
Kwenda said the company exercised its pre-emptive rights to acquire 40% of the minority shareholder’s interest in ME Charhorns from Dairiboard Zimbabwe Ltd, which consequently gave the group 100% ownership of the subsidiary.
Cairns said it was about to conclude a supply chain management agreement with a third party which would assist the turnaround of the group by December 2012. Kwenda said negotiations with Finance Trust of Zimbabwe Ltd to dispose of its entire stake in the group were at an advanced stage.
This, he said, would pave the way for a capital-raising programme to consolidate the company’s financial position.
Cairns CEO Silas Gweshe early this year told businessdigest that the company was implementing a debt restructuring plan that would see the group returning to profitability by end of 2013.
He said part of the company’s strategy was to convert short-term debt into long-term borrowings and the company had already engaged partner banks to see that process through.
The company said the relatively stable economic environment continued to provide the necessary platform for the recovery of the food industry through increased capacity utilisation.
However, according to Kwenda, the group had so far failed to take advantage of the recovering economy due to debt burdens and working capital constraints but this was now being addressed.