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Starafrica Corporation hails tight monetary policy

Source: Starafrica Corporation hails tight monetary policy | Sunday News (Business)

Judith Phiri, Business Reporter

LISTED sugar processor, Starafrica Corporation Limited has said the tight monetary and fiscal policies enacted in May 2023, if maintained, will bring more stability to the market.

In a statement accompanying the unaudited abridged financial results for the year ended March 2023, the board chairman, Mr Rungamo Mbire, said the local currency has also regained value.

“The Zimbabwe dollar has regained value after a steep depreciation in June 2023. The tight monetary and fiscal policies enacted in May 2023, if maintained, are expected to bring more stability to the market. The global economic outlook continues to be weighed down by interest rate hikes by most central banks and the negative spill-over effects from the Russia- Ukraine conflict.

“The Company looks forward to the Government reinstating duty on imported sugar, a development which will impact positively on the local sugar industry. The Company will continue to tighten its cost-mitigation measures in an effort to improve the operating profitability of both the refinery and the sugar specialties unit.”

He said a 30 percent increase in turnover was recorded in the year under review, from ZWL$38.5billion in the prior year to ZWL$50.1billion. Mr Mbire said the improvement was largely attributable to strong demand for all the group’s products during the year under review.

“However, the group’s operating profit shrunk by 93 percent, from ZWL$5.0billion in the prior year to ZWL$0.4billion. The lower operating profit was a direct result of increases in raw sugar prices and operating costs in real terms. Increasing global inflationary pressures have resulted in a spike in the costs of imported chemicals, packaging and refinery spares,” he said.

He said in historical terms, revenue increased by 317 percent, from ZWL$10.2billion recorded in the prior year to ZWL$42.5billion, while operating profit increased by 26 percent, from ZWL$1.7billion to ZWL$2.2billion.

Mr Mbire said during the year ended 31 March 2023, sales volumes of granulated sugar produced by Goldstar Sugars were stagnant, having been 82 500 tonnes sold in the prior year to 82 321 tonnes.

“This was on the back of pressure from imports after promulgation of Statutory Instrument 98 of 2022. The Ministry of Finance and Economic Development later suspended duty on the importation of sugar into the country. However, production was adversely affected by raw sugar stockouts and power outages. This resulted in production volumes reducing by 6 percent, from 82 399 tonnes in the prior year to 77 270 tonnes during the year under review. The unit continues to focus on refurbishment and replacement of critical items of plant and machinery to improve plant availability and therefore, the refinery’s throughput in terms of both quantity and quality of granulated white sugar.”

He said the plant continued to be certified by The Coca-Cola Company and maintained its Food Safety Certification under the FSSC 22000 series, while these certifications enable the group to supply sugar to The Coca-Cola Company franchisees in the Southern African region and beyond. In terms of Country Choice Foods, Mr Mbire said their products continued to dominate the market on the back of competitive pricing.

He said this has positioned the unit’s products among the most affordable in the market as consequently, sales volumes increased by 9 percent, from prior year’s 1 879 tonnes to 2 048 tonnes.

Mr Mbire added: “In inflation-adjusted terms, revenue performance for properties business improved significantly with ZWL$337.5million of rental income being recorded, compared with ZWL$162.2million in the prior year. The unit has recovered significantly from prior year, which was negatively impacted by the Covid-19 pandemic that reduced tenants’ ability to generate income and meet their rental obligations.”

He said their associate, Tongaat Hulett Botswana, recorded a profit for the period under review of ZWL$958.1million, with the Company’s share being ZWL$319.4million after converting the earnings into Zimbabwean Dollars at the Reserve Bank of Zimbabwe (RBZ) auction exchange rate as at 31 March 2023.

Reserve Bank of Zimbabwe (RBZ)

Meanwhile, Mr Mbire said considering the company’s focus on ensuring that adequate working capital is maintained, while facing a volatile operating environment, the board has taken a decision not to declare a dividend for the year ended 31 March 2023.