Barter deal puts Cafca in profitable position

Published: 21 February 2014

Cafca MD Rob Webster told the AGM that the copper barter recycling deal has put the firm in a profitable situation as they expect the profit to go up 30% year-on-year.

"The barter deal started last year. It's the recycling of copper that we do with Zesa; so it's replacing the overhead lines that were previously made out of copper. We're replacing them with aluminium and because of the price difference between copper and aluminium there is a financial benefit to doing that," he explained.

He further noted that they share the financial benefit with Zesa. Copper trades at $8 000 per tonne while aluminium trades at $3 000 per tonne as indicated by Webster.

The company hasn't imported copper for about six months now and has been relying solely on recycled copper barter.

Turnover for H1 to March 2014 is expected to be down about 20% year-on-year and the profit will be up about 30% year-on-year.

Exports, which have low margins, have fallen to 15% of turnover compared with 25% last year. At the same time the proportion of local sales has increased and this has been positive for the company because margins are higher locally than in the export market.

"We were pushing more exports this time last year at very low margins and secondly the barter deal though messy and murky has got very good margins," he said explaining the drop in sales and the subsequent margin improvement.

He also said from the budget they were given 20% duty against SADC imports and 30% against the rest of the world imports as government moved to protect local industry and that should help improve volumes.

Webster said the company managed to eliminate all of their borrowings last week and they expect to remain debt free for the rest of the year. Thus, "there will be no financial charges for the rest of the year."

"Resources that we generate, hopefully will be invested back into the system to improve quality or efficiencies so we're looking to improve our stockholding, to improve sales," he said.

Other than that, Webster told the meeting that their exports are still an issue and are looking at getting 15% of turnover into the export market.

He said they are also focusing on cutting the firm's costs for the year to be below what they were last year.

- zfn