Harare — ZIMBABWE Stock Exchange-listed, AICO Africa Limited says seed cotton intake for the year slipped by 20 percent to 98 091 tonnes down from the previous year intake of 122 451 tonnes.

In a statement accompanying the company's interims ending September 30 2009, AICO attributed the slump to inadequate supply of inputs occasioned by macro-economic challenges that prevailed in the previous year.

Consequently the national crop declined by 13 percent to 210 081 tonnes from the prior year's 241 711 tonnes.

The group said the statutory instrument to regulate the cotton industry, promulgated in August this year is expected to curb side marketing and underwrite orderly seed cotton procurement during the 2010 buying season and beyond.

"This has resulted in orderly distribution of inputs. Equally we expected this to reduce incidences of side marketing," AICO said.

During the period under review, the company said the fall in commodity prices reduced winter cereal sales in Zimbabwe and Zambia as viability problems associated with liquidity affected cotton ginners.

The world's major economies were adversely affected by the global financial crisis, which ultimately led to a recession.

Global commodity prices fell drastically relative to prior year resulting in both regional and local commodity prices falling, negatively affecting viability of exports out of Zimbabwe.

In addition credit lines became increasingly difficult to access.

AICO said: "The group has successfully selected growers for the new season in Zimbabwe and Zambia.

"Liquidity challenges in Zimbabwe are the main constraint on demand. However, regional demand for seed is still high and current indications are that they may outstrip supply".

The group said capacity utilisation at Olivine had increased with sales going up by 33 percent over the prior year despite low demand due to low disposable incomes. Olivine is struggling to win back its market share as it faces 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 group said.

During the period under review, revenue for the group was limited to US$54,4 million, attributing the low revenue to low commodity prices.

Loss before tax was US$4,5 million; nevertheless, the result was adversely affected by higher than anticipated crop procurement, logistics and overhead costs.

For the outlook period, AICO is hoping for increased donor support and strengthening of food self sufficiency to push the demand for seed.

An increase in volume growth together with the recovery of commodity prices will result in strong group performance.