Finance costs hamper Star Africa

By Ndafadza Madanha

FINANCE costs continue to weigh down on the profitability of sugar concern Star Africa.

Though the company recorded a 63 percent increase in income for the six months ending September it could not help avert a US$1.3m loss before tax.

“In the six months ended 30 September 2017, the company achieved a 63 percent increase in turnover which totaled $23.2m compared with $14.3m recorded in prior year.

The EBITDA amounted to 1.9million which is not only better than a negative of 0.3m in prior year but is even higher than the full year EBITDA of $1.6m achieved last year.

The strong performance is on the back of continued optimization of post upgrade efficiencies, improvements in quality and quantity, cost containment strategies and positive effects of working capital accessed as the secondary scheme.

The improving operational profitability is however dampened by finance costs which almost entirely relate to the legacy debt. The interest for the half year totaled $3.1m and was thus greater than the EBITDA thereby sliding the company into a loss before tax of $1.3m against a comparative loss before tax of $3.3m for the same period last year.

EBITDA was affected by the squeeze on margins from decreasing selling prices which resulted in the earnings not being sufficient to fully cover the finance charges,” said Star Africa board chair Joel Mutizwa in a statement.

Operationally the various units of Star Africa continued to make positive contributions.

Goldstar saw increase in both production and sales by 75 and 70 percent respectively buoyed by upgrade on the plant and intensified marketing and distribution strategies.

Country Choice Food saw a 21 percent growth in EBITDA from $261 000 recorded in prior year to $314 000.

Bottling of honey has begun at Country Choice as the company seeks to enhance its portfolio range.

Its associate company in Botswana achieved a $1.1m profit.

The property business recorded a margined increase in turnover from $270 000 in prior year to $272 000.

EBITDA was down to $105 000 owing to operational and repair costs related to change of tenants and valuation costs incurred in the period under review.

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