Cottco Holdings Limited HY 2010 financial results

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Cottco Holdings Limited leading Agriculture company listed on the Zimbabwe Stock Exchange has released their half year Results . Check out insights into this company in their presentation which appears below.
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Cottco Holdings Limited HY 2010 financial results

  1. 1. 1 Lytton Road, Workington, P O Box 2697, Harare, Zimbabwe; Tel: +263-4-771981-5, 748682-3; Tellular lines: 0912 233547/8; Fax: +263-4-753854, 708573, 707203, 748900 Abridged Group Statement of Cash Flows For the Six Months Ended 30 September 2009 Cash flow from operating activities Operating cash flow before reinvesting in working capital 2,731 Increase in working capital (39,127) Net finance costs (5,302) Taxation paid 1,092 Net cash utilised in operations (40,606) Net cash outflow from investing activities (3,059) Net cash inflow from financing activities 35,897 Decrease in cash and cash equivalents (7,768) Group Statement of Changes in Equity For the Six Months Ended 30 September 2009 6 Months 30-Sept-2009 US$'000 Share Non- Total Capital and Revenue Total Controlling Equity Reserves Reserves Interests US$'000 US$'000 US$'000 US$'000 US$'000 Balances at 31 March 2008 83,642 25,738 109,380 17,486 126,866 Changes in equity for 2009 Share based payment transactions 3,980 - 3,980 99 4,079 Total comprehensive income for the year (35,479) 7,774 (27,705) 12,036 (15,669) Balance as at 31 March 2009 52,143 33,512 85,655 29,621 115,276 Changes in equity for the period Total comprehensive income for the period 4,507 (2,781) 1,726 1,674 3,400 Balance at 30 September 2009 56,650 30,731 87,381 31,295 118,676 Directors: P Sithole (Chairman), C Chitiyo (Ms), B Mudzimuirema*, A Nhau, B L Nkomo, L Preston. (*Executive) COMMENTARY Abridged Group Unaudited Results For the Six Months Ended 30 September 2009 Abridged Group Statement of Comprehensive Income for the Six Months Ended 30 September 2009 6 Months 12 Months 30-Sept-2009 31-Mar-2009 US$'000 US$'000 Revenue 54,501 120,677 (Loss)/profit from operations (1,204) 26,886 Investment income 88 275 Other gains/(losses) 1,890 (1,350) Finance costs (5,302) (8,966) (Loss)/profit before taxation (4,528) 16,845 Income tax 331 (1,519) (Loss)/profit for the period (4,197) 15,326 Other comprehensive income: Exchange differences on translating foreign operations 7,597 (4,914) Exchange differences arising from change in functional currency - (32,936) Revaluation of property, plant and equipment - 8,702 Income tax relating to components of other comprehensive income - (1,847) Other comprehensive income for the period, net of tax 7,597 (30,995) Total comprehensive income for the period 3,400 (15,669) Profit attributable to: Owners of the parent (2,781) 7,774 Non-controlling interests (1,416) 7,552 (4,197) 15,326 Total comprehensive income attributable to: Owners of the parent 1,726 (27,705) Non-controlling interests 1,674 12,036 3,400 (15,669) Basic (loss)/earnings per share (US cents) (0.52) 1.47 Diluted (loss)/earnings per share (US cents) (0.51) 1.42 Abridged Group Statement of Financial Position as at 30 September 2009 30-Sept-2009 31-Mar-2009 US$'000 US$'000 ASSETS Non-current assets Property, plant and equipment 131,901 132,770 Investment property 1,141 1,141 Investment held in associate 65 65 Total non-current assets 133,107 133,976 Current assets 129,357 78,934 Total assets 262,464 212,910 EQUITY AND LIABILITIES Capital and reserves Equity attributable to owners of the parent 87,381 85,655 Non-controlling interests 31,295 29,621 Total equity 118,676 115,276 Non-current liabilities Borrowings third party 54 189 Deferred tax liabilities 38,365 39,589 Total non-current liabilities 38,419 39,778 Current liabilities 105,369 57,856 Total equity and liabilities 262,464 212,910 Attributable to Equity Holders of the Parent Notes to the financial statements 1. Presentation The financial statements are presented in United States dollars (US$), rounded off to the nearest thousand. 2. Accounting policies Accounting policies have been applied consistently with those used in the previous year. 3. Comparatives The comparative information relating to the six months ended 30 September 2008, has not been presented. Transactions for the group related to that period were reported using the Zimbabwe dollar as the functional currency. During the second half of the 2009 financial year, the group changed its functional currency to the US dollar. Subsequently the full year’s results were converted to US dollars. However, the conversion was performed using the 12 months as the reporting period. The Board is of the view that an attempt to allocate the converted amounts to the respective halves may result in potentially misleading information and resultant comparative information would not meet the objective of International Financial Reporting Standard 1 paragraph 1 (c), which is to generate high quality, transparent information at a cost that does not exceed the benefits to users. The Statement of Financial Position as at 31 March 2008 was not converted to US Dollars. Consequently, the comparative Statement of Cash Flows for the 12 months ended 31 March 2009, which is dependent on the 31 March 2008 balance sheet has not been presented. 4. Depreciation and revaluation of assets The assets of Zimbabwean subsidiaries were revalued as at 31 March 2009. The valuation of Land and Buildings, and Plant and Machinery catergories of Property, Plant and Equipment was conducted on 31 March 2009 by an independent valuer, CB Richard Ellis, on a net replacement basis. The remaining catergories of Furniture and Fittings, and Motor Vehicles were revalued by the Directors as at 31 March 2009. The valuation method used by the Directors is consistent with that of the independent valuer. The current period depreciation is based on the revalued amounts. 5. Supplementary Information 6 Months 12 Months 30-Sept-2009 31-Mar-2009 US$'000 US$'000 5.1 Depreciation 4,275 7,850 5.2 Capital expenditure 3,406 5,030 5.3 Commitments for capital expenditure Contracted for - 291 Approved by the Directors but not yet contracted for 12,848 15,127 Total 12,848 15,418 ECONOMIC OVERVIEW The first half of the financial year witnessed the introduction of a multi-currency environment. While this is a welcome development, lack of liquidity due to the global financial crisis and lack of multilateral funding has remained a major constraint. With major economies moving out of the recession, commodity prices have started to improve. Meanwhile, local power supply constraints continue to be the number one hindrance to production. BUSINESS REVIEW Cotton Seed cotton intake for the year slumped to 98 091 tonnes down from the previous year intake of 122 451 tonnes. This was due to inadequate supply of inputs occasioned by the macro economic challenges that prevailed in the previous year. Consequently the national crop declined to 210 081 tonnes from prior year’s 241 711 tonnes. Ginning is now complete. Inputs distribution for the current cropping season is in progress. Focus is on a smaller grower base ably supported by a more comprehensive inputs package in order to improve yields and overall intake volumes. The statutory instrument to regulate the Cotton Industry was promulgated in August 2009. This has resulted in orderly distribution of inputs. Equally, we expect this to reduce incidences of side marketing and underwrite orderly seed cotton procurement during the 2010 buying season and beyond. Seed The fall in commodity prices reduced winter cereal sales in Zimbabwe and Zambia. At Quton, viability problems associated with the credit crunch and low lint prices affected cotton ginners. In turn, this has resulted in a slow start to the early season cotton seed sales. Otherwise, most of the expected seed from growers has been delivered. The group has successfully selected growers for the new season in all the countries. Liquidity challenges in Zimbabwe are the main constraint on demand. However, regional demand for seed is still high and current indications are that demand may outstrip supply. Spinning Production and sales have improved in the half year under review. Inroads have been made in new regional export markets. Power outages continued to be a major constraint on production. FMCG Capacity utilisation has improved at Olivine, but demand remains subdued due to low disposable incomes. However, sales improved by 33% over prior year. The business was able to regain market share despite competition from “duty free” imported products. This had a negative impact on margins. On the other hand, liquidity constraints continue to hamper operations while coal, water and electricity outages continue to hinder production. The frozen vegetable business also finds itself with depressed local demand on the back of low disposable incomes. GROUP PERFORMANCE Despite high carryover stocks, generally, Group revenue was limited to US$54.5 million due to low commodity prices in the period under review. Loss before tax of US$4.5 million is in line with the Group’s seasonal business outlook. Nevertheless, the result was adversely affected by higher than anticipated crop procurement, logistics and overhead costs occasioned by real increases in costs following the introduction of the multi-currency regime in the country. Net cash utilised in operations of US$40.6 million was driven by crop purchases across the Group. This was financed by net loans raised of US$35.9 million, resulting in a decline in cash and cash equivalents of US$7.8 million for the period under review. Capital expenditure amounted to US$3.4 million. OUTLOOK Increased donor support and strengthening of food self sufficiency programmes will continue to push demand for seed. The FMCG cluster expects higher sales volumes and revenues in the 2nd half on the back of the forthcoming festive season, though this is with guarded optimism because of the ongoing liquidity challenges in the economy. The cotton business, suffered significant cost increases on crop purchases and related logistical costs in the first half, which will materially affect its profitability to March 2009. Consequently, the Group’s full year earnings are likely to be lower than last year. Beyond this horizon, we expect volumes to grow and recover. This, together with recovery of commodity prices will result in strong Group and entity performance throughout. DIRECTORATE The Board wishes to advise that Mr. H. Mapara, the Group Chief Executive of AICO Africa Limited, resigned from the Company with effect from 1 December 2009 to pursue private interests. The Board takes this opportunity to thank Mr. Mapara for his service to the Company in the past 15 years and wishes him well in his new endeavours. By Order of the Board P. Manamike Company Secretary 2 December 2009

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