Starafrica faces ZWL$679 billion loss due to suppl...

Starafrica faces ZWL$679 billion loss due to supply disruptions

Audrey Galawu

Assistant Editor

In a challenging economic landscape characterised by hyperinflation, the financial results of Starafrica Corporation Limited group for the year ending March 31, 2024, underscore the complexities of operating in Zimbabwe’s volatile economic environment. The results, adjusted for inflation to comply with International Accounting Standard 29 (IAS 29), reveal both resilience and obstacles, as the group recorded a 23% increase in turnover but suffered a significant operating loss

Total turnover for the group rose by 23%, from ZWL$1.54 trillion to ZWL$1.90 trillion, largely propelled by inflationary pressures.

However, despite this revenue growth, the group reported an operating loss of ZWL$679 billion compared to a ZWL$13 billion profit the previous year.

“This loss was primarily attributed to a three-month plant shutdown caused by raw sugar supply challenges, as well as rising costs of key raw materials and other overheads,” said group chairman, Rungano Mbire.

In historical cost terms, the group’s revenue saw an astounding increase of 789%, rising from ZWL$42 billion to ZWL$378 billion. However, this impressive figure was overshadowed by a dramatic 910% drop in operating profit, turning a ZWL$2.28 billion profit into an operating loss of ZWL$18.47 billion.

Despite these setbacks, the Group remains committed to rationalizing operations to mitigate costs and improve efficiency.

Goldstar Sugars, a key business unit within the group, experienced a tough year due to raw sugar supply constraints. Sales volumes of granulated white sugar dropped by 32%, from 82,321 tonnes in the previous year to 55,799 tonnes, while production throughput similarly fell 32%, from 77,270 tonnes to 52,605 tonnes.

These disruptions, however, are being addressed through active engagement with stakeholders, and raw sugar supply issues have largely been resolved. In addition, GSS continues its refurbishment and replacement program for critical plant and machinery components to improve operational efficiency and product quality. Notably, GSS retained its certification from The Coca-Cola Company and maintained its Food Safety Certification under the FSSC22000 series, ensuring its continued reputation for high standards.

Country Choice Foods, another key unit of the Group, faced a 39% decrease in sales volumes of sugar specialty products, dropping from 2,048 tonnes to 1,244 tonnes. Exchange rate distortions in retail outlets were the main culprit behind this decline, affecting product uptake.

However, CCF responded proactively by launching new products, including bicarbonate of soda, desiccated coconut, and muesli. With sufficient production capacity to meet market demands at competitive prices, CCF remains focused on innovation and maintaining its market position.

The group's properties business demonstrated resilience, with rental income remaining relatively stagnant at ZWL$10.3 billion, compared to ZWL$10.4 billion in the previous year. While inflation eroded the real value of income, this stability reflects prudent management in a turbulent economic environment.

Tongaat Hulett Botswana, in which the group holds a stake, provided a silver lining with a reported profit of ZWL$21 billion. The group’s share of this profit amounted to ZWL$7 billion, converted to Zimbabwe Dollars at the average RBZ Interbank Exchange Rate.

The group’s financial performance, while hampered by external challenges such as inflation and supply disruptions, reflects the difficulty of operating in hyperinflationary conditions.

As raw sugar supply issues are resolved and with a continued focus on improving plant efficiencies, the Group is positioning itself to rebound from this period of difficulty. New product launches from CCF, coupled with GSS's continued compliance with global food safety standards, show that despite current headwinds, the Group is innovating and adapting to ensure future growth.