HARARE – Cottco Holdings says it expects reduced intake in the current season due to the late onset of the rains and the erratic rainfall patterns but payment modalities have been put in place to improve farmer viability and ensure that farmer payments are made timeously.
In a trading update for June 30, 2022, Cottco said that intake is expected at 85 000 tonnes compared to 116 000 tonnes last year, a decrease of 26.7%. The buying season commenced on June 13, 2022 after a month’s delay owing to the delay caused by the weather conditions. As of July 13, intake stood at 34 497t with peak expected in August.
The group, which is currently on cautionary pending government plans to increase its shareholding from the current 37%, said payment modalities had been put in place. A farmer subsidy funding from government was availed in full on July 8 and considerable progress had been made in payments to farmers.
A balance of $956 million from last year’s crop was still outstanding after the group paid out $3 billion to farmers. These outstanding payments will be paid in the current selling season.
For the year to March 31, 2022, Cottco had sold 50 187t of lint with 11 663t (23%) allocated to local customers and the remaining exported. Cottco said local toll-spinning arrangements had resulted in 937t of lint being value-added. However, recent reports say that lint producers face viability concerns as the main local players had only received half of their lint allocation. Textile manufacturers normally require between 7 000 and 8 000t of lint per annum.
Ginned seed of 62 160t was sold mainly to local oil expressors and stock feed suppliers. The group said ginning is set to commence on July 18 with lint output being prioritised to support local farmers.
In terms of financial performance, the group noted that the current high inflation environment continues to put pressure on margins while the increase in local borrowing rates to 200% per annum is also of concern as it needs to access credit “from time to time” for operational needs. Arrangements are now in progress to bring financial audits to current after the 2016 and 2017 audits were stalled due to the lack of a board.
The group said capital raising for value addition projects and acquisition of additional hybrid seed is underway.
On the fire incident in Chipinge, Cottco said insurers had paid US$1.3 million to date and additional receipts are expected as the claim is being finalised. Fire destroyed US$2.5 million or 1.2 million kilogrammes worth of lint last year at its toll ginning site in Chipinge.