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CFI eyes profitability

CFI Holdings Ltd sees the group returning to a profit position in the 2015 financial year (FY15) once its land-for-debt swap deal with local financial institutions is concluded, a top company official said.By Chris Muronzi

CFI CEO Steve Kuipa told businessdigest in an interview this week that the transaction with banks will reorganise the group’s balance sheet and see the company bottom out of a loss position in FY15. IT has a September 30 year-end.

The group owes U$13 million in short-term borrowings to various unnamed financial institutions and has a long term five-year loan of US$3 million from PTA Bank.

In the half year to March 31 2014, CFI paid US$1,7 million in interest charges. Should the group successfully conclude the land for debt transactions as envisaged by management, this will see the company returning to a profit position in FY15. The group incurred significant once off retrenchment costs of US$1,4 million in H1 FY14 and a write-down of US$0,8 million on its investment in Windmill.

The group registered a half year turnover of US$41,8 million against US$48 million in prior year as a result of significant streamlining efforts undertaken in its poultry division and inadequate working capital in its specialised division.

A loss of US$5,5 million was recorded against US$1,8 million registered in prior year.

Kuipa said the land deal with banks would offer some relief to the group and materially correct the group’s capital structure, allowing for a more sustainable structure going forward.

He said: “while efforts are underway to address the group’s performance, the payoff from the measures taken will not see the group reverse the loss in the last half ending September 30. The group’s losses have receded significantly in the past couple of months given the significant streamlining efforts undertaken. Beyond this, the group is in the process of concluding a land-for-debt swap with the financial institutions owned by the group and we believe that this should offer some relief and allow reorganiation of the group’s balance sheet.

If our plans go through as planned, we see the business turning around in the coming year,” Kuipa revealed that the Group was undertaking the development of 635 high density units around Suncrest chickens with a local developer, Tencraft Construction. The various critical approvals are largely in place and the actual development will commence shortly, he said.

“The structures and pricing will be something that is line with the other projects being undertaken in the markets.

We are fortunate in that the site for the project is favourably located for a cost effective development and we are looking forward to playing our role in offering affordable housing under the current government thrust to promote affordable housing to our populace,” Kuipa said.

He said owing to the delays encountered in completing the recapitalisation process and the overall slowdown in the markets, the group has been forced to streamline its operations and hence the decline in turnover levels.

“Tied into our recapitalisation challenge, we are still grappling with the effects of using old efficient poultry production facilities in an environment that demands efficiency. Add to that, the availability and cost of utilities has affected us negatively in the period under review.

The streamlining exercise has occasioned significant retrenchment costs. We still have a few more to complete in the second half of the year. As we work on remodeling our business to align it to the reality of limited capital availability and to our socio demographic changes, particularly on agro land assets, which are viewed by investors as high risk given the lack of security tenure on them,” Kuipa said.

He said CFI has been entertaining various offers from investors keen to acquire equity stakes in Victoria Foods, its food and milling business and its other subsidiaries.

But he would not be drawn into naming any of the parties that have approached the group, citing confidentiality.

On the poultry side of the business, Kuipa said he was happy with the intervention of the PTA long term infrastructure facility at Glenara in as far as improving production efficiencies.

The group spent US$2 million on environmentally controlled poultry houses which effectively enhanced efficiencies and materially lowered production costs.

The houses have a placement capacity of 42 000 birds each. The group has four such environment- controlled houses.


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