Colcom volumes, turnover growth to continue

Colcom volumes, turnover growth to continue
Published: 15 November 2013
Colcom expect the trend of volumes and turnover growth to continue at about 14% over prior year and that profitability will be enhanced by managing all operational costs downwards in an environment of declining margins, Chief Executive Theophilus Kumalo told the AGM this morning.
 
"We need to remain flexible on pricing, continue to review pricing and respond more quickly to shifts in the market to ensure that we remain competitive versus other protein products and extract whatever margin we can from a very depressed market," he said.
 
He stated that the need to continue to re-tool and re-equip the farm and the factory is top priority and they're making inroads there, as they seek to improve capacity and efficiency.
 
Giving a group overview, Kumalo told the meeting that the group turnover for the 4 months, July to October 2013 was 14% up on the same period in 2012. Meanwhile, the volume growth over prior year was 15%.
 
He added that turnover for the Colcom Foods Division, which includes Triple C pigs and the Pies business declined by 10% versus comparative period in the prior year.
 
The drop was mainly due to the discontinuation of frozen pies and the reduced production tonnage of pork pies and low cost sausages.
 
Kumalo, further noted that at present, most of the major categories of protein are in oversupply situation in Zimbabwe which results in low, and sometimes negative, margins.
 
He stated that overall, the group GP% margins have also been reduced by the trading models operated by the Texas stores under AMP.
 
Under Triple C, Kumalo indicated that with stiff competition and market resistance to pricing, they reduced the producer pig price significantly and this has eroded the Triple C farm profitability to breakeven levels.
 
In addition, at the farm, this price reduction resulted in a negative livestock valuation adjustment of $158 308 in the period under review.
 
"After successfully automating feeding systems at the grower site, Triple C, has commenced the installation of automatic feeders into the main site so as to enhance efficiencies, cut costs and prevent feed wastage and we will continue to automate the weaner site feeding systems thereafter," he said.
 
Kumalo added that Triple C has secured its maize and soya requirements through to next year's harvest.
 
Under manufacturing, he said with market demand significantly below production capacity, the factory is producing at approximately 66% of capacity.
 
"Aged equipment is eroding the company's efficiency and has resulted in high maintenance costs. Consequently, we have purchased a new emulsification line, smoking, cooking and cooling equipment and a packing line at a cost of $1.478 million.
 
"This equipment will allow the production of smoked and cooked products in excess of 200 tonnes per week and will be commissioned in January 2014," he said.
 
He said the funding of the plant will come from borrowings and the group's own resources. Meanwhile, they commissioned a refurbished 8 tonne boiler and steam production has been stabilized.
 
Kumalo added that this installation has resulted in reduced local consumption from 8 to 5 tonnes per day.
 
Turning to the outlook, he indicated that at AMP they have identified that factory capacity is unable to accommodate future growth, therefore they are working on plans to expand their factory.
 
In addition, Kumalo pointed out that AMP expects to open Texas shops on Mbuya Nehanda Street and at the AMC complex, by end of November.
 
He noted that consumers are trading down and as a business they have identified about 5 commodities which they are pushing to the mass market. The results from that endeavor have been encouraging, he added.
 
All directors seeking re-election were reappointed and fees of $50 825 approved while auditors Ernst and young were re-elected with remuneration of $158 163 also approved. There was also an announcement that board Chairman Rob Davenport was retiring from the board after serving the company for decades.  

- zfn
Tags: Colcom,

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