AICO reports a depressed set of financials

Published: 01 July 2013
AICO reported a depressed set of financials negatively impacted by the lower seed sales volumes, lower lint prices, impairments as well as high finance costs.

Although sales volumes grew 18% to 213,720t driven by a 45% increase in cotton intake volumes, revenue declined by 10% as average lint prices declined by 45%. The cotton business contributed 51% to group revenue, seed business 40% and FMCG 9%.

Gross margins for the FMCG business improved to 13% from 1% pushing group gross margins to 36%. Operating profit declined 37% negatively impacted by US$19.2m impairments of which US$12m were attributed to the cotton input scheme. Excluding impairments, overheads grew 11%.

Cash flows were strained although cash generated from operations turned positive due to reduced working capital. Overall borrowings reduced 9% to US$125.9m, of which 91% are cheaper off shore facilities at interest rates of between 11% and 13%.  

Management anticipates a recovery in the seed business. Recoveries in the cotton business for out grower scheme are expected to improve. The cotton business is saddled with debt of approximately US$35m. FMCG business requires approximately US$20m for recapitalisation.

Management report that the fund raising and group restructuring initiatives are at a fairly advanced stage. This will result in the unbundling of the group. AICO's 51% stake in SeedCo is valued at US$80.4m.
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