SUGAR producer starafricacorporation Limited’s liquidity has fallen to just $0,34 for every dollar of short-term debt owing to obligations to creditors, its latest financials have shown.
The increase in debt is because of the firm’s trade and other payables, money owed for goods and services bought on credit, which rose by 59,37% to nearly $43,4 billion.
This was from the comparative 2022 figure of $27,23 billion.
The statement for the period ended September 30, 2023 showed that starafrica had overshot its bank overdraft by 186% to $8,37 billion in the period under review from the 2022 comparative.
It acquired this debt and ran its overdraft to ease working capital pressure. Revenue was negatively affected by the company’s Goldstar Sugar brand which saw a 41% fall in volumes.
“Goldstar Sugars experienced a 41% decrease in sales volumes of granulated sugar compared to the same period in the previous year. The decline was mainly due to depressed demand caused by the influx of cheaper sugar imports, after the suspension of duty on basic commodities,” starafricacorporation chairman Rungamo Mbire said.
“Additionally, the refinery was closed for three months from July to September 2023 owing to relative upward price adjustments by the sole local supplier, which made the business’ products uncompetitive relative to imports. However, the pricing issues were resolved with the raw sugar supplier at the end of September 2023.”
The depressed sales for the company’s main product, led to the firm importing part of its raw sugar requirements from Zambia while negotiations were underway with the local supplier.
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Mbire said negotiations concluded successfully, and operations resumed in October 2023.
According to the sugar producer, the promulgation of Statutory Instrument 80 of 2023, led to cheaper imported brands of sugar penetrating the local market, resulting in reduced demand for locally produced sugar.
This has negatively affected the industry's ability to meet its working capital requirements, according to the chairman.
Resultantly, the firm was unable to meet the rise in administrative as well as selling and distribution expenses of nearly 210% in the period under review to $34,83 billion, from the 2022 comparative.
Further, the Zimbabwe dollar’s depreciation by over 600% during the period under review led to the firm’s exchange loss widening by 5 134,5% to $24,77 billion from the comparative. Ultimately, the rise in expenses and the widening of its exchange loss saw starafrica’s overall loss for the period stretching by 4 716% to $22,61 billion, from its 2022 loss-making position.
Overall, revenue for the group increased by just 35% to $99,4 billion during the period.
“The 2024 National Budget outlines a proposal to reinstate the suspended duty on basic commodities from the 31st of January 2024,” Mbire said.
“The removal of sugar from duty-free imports will positively impact the local sugar industry, preserve local jobs, and ensure Zimbabwe continues to retain the much-needed foreign currency for the development of our economy.”
Mbire said despite the challenges faced during the period under review, the company had strategically implemented measures aimed at ensuring a return to profitability and positive cash flow generation.
“Management has assessed the group's going concern position by considering the current trading activities, financial position, and projected requirements,” he said.
“The industry has sufficient production capacity and capability to avail good quality sugar in sufficient quantities to meet the country's requirements. The company looks forward to seeing a performance improvement soon.”
The drop in sugar volumes led to sales volumes at starafrica’s Country Choice Foods subsidiary, a manufacturer and marketer of sugar specialty products, falling by 46% during the period.
