Cottco Holdings Limited Reports 48% Increase in Intake, Implements Cost Containment Strategies to Improve Financial Performance

Published On: September 18, 2023Company: Cottco Holdings Limited (COTT.zw)
What is the main strategy adopted by Cottco Holdings Limited to improve its financial performance?
Cottco Holdings Limited has implemented cost containment strategies to improve its financial performance. This includes a complete roll out of Smartfarmer, a resource management system to capture farmer information in real-time, thereby reducing stationery and employment costs. It also includes savings through competitive bidding. In addition, the company has used a mix of local borrowings and offshore pre-finance arrangements to reduce finance costs.

Summary

  • International lint prices have increased due to the threat of drought conditions and increased consumption. Oilseed prices declined as soya and sunflower seed supply increased, against a stable local demand.
  • Local market liquidity was tight, causing Cottco to struggle with funding at first but improved as the season progressed. Farmer morale improved due to a good buying season. An increase in registered farmers was observed.
  • The company showed a 48% increase in intake from the previous year. Cottco paid USD 15.9 million to farmers and expects to clear the remaining amount in September 2023.
  • Management implemented cost containment strategies, which are expected to improve margins by the year-end of March 2024. These include a rollout of the Smartfarmer system and competitive bidding, which helped in savings.
  • Despite using a mix of local borrowings and off-shore pre-finance arrangements to reduce finance costs, the company expects only marginal profits for the year ended March 2024.
  • External auditors were changed from KPMG Zimbabwe to BDO Zimbabwe Chartered Accountants in compliance with local regulations.
  • Management changes took place as the former Managing Director resigned and a Substantive Company Secretary was appointed.
  • The government is planning to increase its shareholding in Cottco. Finance due diligence has been completed by Grant Thornton.
  • The company is now focusing on crop establishment for the next season. Suppliers for the Presidential Inputs for Cotton Program started delivery of fertilisers for the fourthcoming season.

Useful links

About Cottco Holdings Limited (COTT.zw)

Cottco Holdings Limited is a cotton-producing company engaged in the process of grading, testing, classifying and marketing of cotton in Zimbabwe. The company, which is listed on the Zimbabwe Stock Exchange, is an exporter of cotton in the country. Cottco is a vertically integrated operation, controlling a range of activities such as ginning, packing, warehousing, and transport. The company also manages its own seed production activities and provides a range of services for small-scale farmers.

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