5 July 2012

Zimbabwe: AICO Finds Suitor for Scottco

ZIMBABWE Stock Exchange listed agro-industrial conglomerate, AICO Africa Limited, says it is close to selling its loss-making spinning business, Scottco, which had struggled to attract investors.

AICO said last week a deal could be signed with potential investors soon. The company did not reveal how much the asset would cost.

AICO has been disposing of loss-making operations as part of measures to cut losses. The group has interest in seed producer Seed Co, Cotton Company of Zimbabwe (Cottco), Exhort, Olivine Industries and Scottco.

A liquidity crunch that had affected Zimbabwean companies since 2009, high costs of production and working capital constraints forced several listed companies to offload loss-making operations.

Last week, AICO reported a 30 percent rise in revenue to US$293,3 million for the year ending March 31, 2012, driven by a nine percent growth in post-tax profits from its seed business.

However, sales volumes declined by five percent, propelled by declines in cotton volumes and in the fast moving consumer goods (FMCG) unit, Olivine Industries.

AICO did not disclose developments over the intended sales of its frozen vegetables outfit, which has also been targeted for sale.

"The spinning business is almost sold and we expect agreements to be signed soon," AICO said in a commentary accompanying the results.

"Interest in Exhort continues to be very strong but suitors appear unable to follow through with required funding due to liquidity issues in the local market. During the year under review, the board approved impairment charges of US$10 million including US$3 million against the group's investment in the spinning business. US$5,5 million of these impairments were charged directly to the group income statement. The balance was charged to equity," said AICO.

AICO's operating profit at US$38,5 million was 16 percent higher than last year.

But pre-tax profits from continuing operations declined to US$18 million during the review period, from US$20 million during the full-year ending March 31, 2011, dragged by a sharp rise in finance costs which ended the year at US$24,3 million during the review period, from US$17,1 million during the year ending March 31, 2011.

Basic Earnings per share declined to US cents 1,16 from US 1,68 cents during the prior comparative period.

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