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August 02, 2015

Zimbabwe cotton concern in $30 million loss

Cottco Holdings Limited (Cottco) has registered a $30,2 million loss in the full year to March 31, 2015 from a profit of $14,9 million recorded in the same period last year.

The company’s executive chairman, Douglas Ncube, said the loss included impairments of $11,2 million in respect of trade and other receivables, inventory and inputs receivables.

“Included in last year’s profit is the amount of $37,2 million arising from profit on the disposal of the discontinued operations,” he said. “Group margins have remained low and were compounded by the high producer price paid as a market defense mechanism, a strategy implemented in order to protect market share."

The group also recorded a nine percent decrease in revenue from $42 million to $38,3 million for the period under review.

Cottco, which operates five ginneries in Zimbabwe with an annual processing capacity of 150 000 metric tonnes of seed cotton, is seeking a partner to help it with funding after talks with the China-Africa Development Fund collapsed and as it renegotiates debt payments with lenders.

Trade in its shares on the local bourse, the Zimbabwe Stock Exchange, was suspended, after the troubled group, which has been reeling from debts amounting to $41 million since dollarisation in 2009, applied for provisional judicial management to the High Court.

The group managed to reduce the debt after disposing of its shareholding in two subsidiaries, Olivine Industries and SeedCo.

The company has since suspended its application for judicial management and is talking to lenders about reorganising its debt, Cottco said in a document sent to investors in March.

Zimbabwe's cotton output declined from 145 000 tonnes to 135 000, a seven percent slump due to declining international lint prices which went from $0,89 to an average of $0,72 per pound.

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