Tough year dampens starafrica’s profitability
Sugar processor, starafrica corporation navigated a challenging economic landscape during the financial year 2024 (FY24), reporting depressed sugar volumes and operating profit despite a rise in total turnover.
In a performance review update for the period to March 31, 2024, the group revealed it was negatively impacted by currency depreciation, high inflation, and tight monetary policy although it is cautiously optimistic about the future on the back of recent policy interventions.
Group chairman Dr Rungamo Mbire lamented the difficult trading environment marked by a weakening local currency and surging inflation, which took a toll on profitability. The Reserve Bank of Zimbabwe’s (RBZ) efforts to curb inflation through high borrowing rates and limited liquidity further squeezed margins.
“During the financial year under review, the borrowing rates remained elevated and liquidity tight, as RBZ continued a tight monetary policy stance to curb inflation and attain exchange rate stability,” said Dr Mbire.
He added that while the reinstatement of import duties on specific products like white sugar was welcomed by the industry, additional taxes on sugar-added beverages and withholding taxes, along with a VAT status change for white sugar, dampened overall demand.
During the review period, total turnover grew by 23 percent year-on-year to $1,90 trillion, primarily due to inflationary pressures. However, the group incurred a significant operating loss of $679 billion compared to a $13 billion profit the prior year.
“This loss was primarily due to a 3-month plant shutdown due to raw sugar supply challenges that have since been resolved, as well as the increased cost of key raw materials and other overheads,” said Dr Mbire.
He said the group was actively working to streamline operations and reduce costs to improve profitability. In terms of operations, Goldstar Sugars (GSS), experienced a significant decline in sales volumes of granulated white sugar. Sales dropped 32 percent to 55,799 tonnes from 82,321 tonnes the prior year.
According to the group, production throughput mirrored the sales slump, with a 32 percent decrease to 52,605 tonnes from 77,270 tonnes. These declines were primarily caused by raw sugar supply issues, which have since been largely resolved through stakeholder engagement.
Country Choice Foods (CCF) also experienced a sales volume decline of 39 percent for sugar specialty products, dropping from 2,048 tonnes to 1,244 tonnes. The group attributed this decrease to exchange rate fluctuations that plagued retail outlets throughout most of the year.
However, CCF displayed innovativeness by launching new products like bicarbonate of soda, desiccated coconut, and muesli. The business unit boasts ample production capacity to cater to the market at competitive prices and remains focused on developing new offerings.
The Properties Business segment displayed relative stability in inflation-adjusted terms, recording rental income of $10,3 billion, marginally lower than the $10,4 billion earned in the previous year.
Tongaat Hulett Botswana, an associate company, reported a profit of $21 billion. Star Africa’s share of this profit translates to $7 billion after converting earnings using the average RBZ interbank exchange rate for the period ending March 31, 2024.
Going ahead, while financial 2024 presented significant challenges, Star Africa is focusing on cost reduction, operational efficiency improvement, and product innovation to provide a foundation for future growth.
The group is also hopeful that the RBZ’s measures will foster a more stable operating environment.
-herald
