ZIMBABWE Stock Exchange listed branded spirits and wine manufacturer African Distillers Limited, (Afdis) shareholders this week approved a US$5 million rights offer to raise capital towards the purchase of a state-of-the-art ready to drink (RTD) manufacturing plant.
Shareholders at an extraordinary general meeting held this week in the capital approved the rights issue to pay for the machine which is being procured from Germany and has capacity to produce 27 000 bottles of ciders -Hunters and Savanna- per hour locally.
The machine is expected to be commissioned by July 2014. Afdis has already secured shareholder loans from the major shareholders --Delta Corporation and Distell South Africa -- to the tune of US$1,5 million channeled towards deposits for the new RTD plant, according to the company's notice to shareholders.
The transaction, which cost the company US$150 000 in advisory, brokerage, underwriting and regulatory fees, will see the company's issued share capital growing to 111 355 shares, up from 95 903 shares while Afdis Holdings shareholding will also grow to 56,4% equity stake from the current 54, 1% equity stake.
The company has been importing ciders from South Africa, adding to its operations cost due to high transport and import charges following government's introduction of 25% surtax.
Afdis marketing and distribution director Albert Chitapi said the company imported two million litres of ciders last year from South Africa.
The new plant, Chitapi said, has capacity to produce 6,5 million litres of ciders annually.
Local consumption of ciders is expected to grow from the 6,5 million next year to 12 million by 2017 largely driven by low prices due to increased efficiencies after the product is available locally.
"Once this plant starts running, we expect a growth of 25% growth in ciders consumption progressively between now and 2017," he said.
Chitapi also said overall local consumption of Afdis products would be at 25% growth next year largely driven by a huge jump in ciders uptake.
"The biggest benefit will be very affordable price and it gives consumers an opportunity to afford the product they felt is outside their reach," he said.
"If you g outside the retailers you will find ciders going for as much as US$3,50, but when we launch local production we will be looking at prices much less than US$1,50."
Chitapi said the company will use concentrates from South Africa and import packing material from South Africa to ensure uniformity and quality of the two brands to be churned out of Afdis locally starting 2014.
" The savanna bottle has cannot be produced locally with that branding so it will be imported but we would like local companies like Zimglass should invest in the production of the glass so that going forward it will be locally available," he said.
Afdis chairman Joe Mtizwa said the approval puts the company in a good position as the company has funds to expand company operations.
"The localisation of cider production is a very huge step for us because we are going to ramp up production and reduce costs as you know the import costs," Mtizwa said.
"You can imagine everything we have been importing in terms of ciders will be produced locally which improves our capacity utilisation brings job creation because when you are importing you are exporting employment."
Afdis' 2013 annual report for the period ended June 30 shows the company's ready to drink business grew by 20, 5 % in the reporting period, driven by ciders.
However, demand for ciders slowed down in the final half of the year after introduction of surtax.
The company's spirit business showed signs of recovery with total volumes growing by 18% in the year.
In terms of financial performance, Afdis reported a US$808, 767 profit in 2013 down from US$1, 1 million prior year.