Padenga engages Zimbabwe’s central bank over the 30-day retention period requirement, expenses steady in Q1
HARARE – Crocodile skins and meat producer, Padenga Holdings has – through its bank, Ecobank, appealed to the Reserve Bank of Zimbabwe for a waiver of the 30-day retention period requirement for all export earnings, seeking to keep the money as most of its inputs are denominated in foreign currency.
In February this year, the RBZ – through the Monetary Policy, introduced a 30-day retention period for all export earnings, after which the funds are offloaded or sold to importers on the interbank market at the ruling exchange rate with sellers getting their dues in the form of RTGS$.
At the group’s analyst briefing recently held in the capital Harare, chief financial officer Oliver Kamundimu said the 30 day retention period had brought some challenges for their business.
“Our production is concentrated in the last quarter of the year, there is actually a period during the first quarter when we actually don’t do any harvesting to allow animals to recover. But we do have input cost that are denominated in foreign currency, when we need the currency we have a sell in January and the next sale in May and we have four months where we need inputs but our money has expired,” said Mr Kamundimu.
“We have addressed that in 2 ways, our very core active bankers Ecobank have approached the RBZ on our behalf to try and allow us to keep the money for longer and secondly we have got into more detail planning about acquisition of our inputs where by when we do have the funds we buy all the necessary inputs that will cover us for 3 months but that ties our working capital to stocks.”
Some of the stocks have got a shelve life. Kamundimu said they would be grateful for the RBZ to allow the company to keep the money for longer.
Meanwhile, the group’s profit after tax recorded a marginal decline from $12.85 million in 2017 to $12.72 million in 2018. PAT as margin, has taken a dip in current year from 42% to 30% due to line of business of local trading which the firm ventured into which doesn’t command as high quantity as in its core business.
Revenue increased 40% to $42.47 million from $30.27 million in 2017. He said the disparity between the rises in the turnover level against the increase in attributable level is affected by the fair value income and effective tax rate.
“There is a decline in fair value income because of a write off because we have to take some skins which don’t have good quality and also our effective tax rate was pier than normal because our proportion of non-taxable income such as the export incentive and fair value income was lower than in previous years,” he added.
The Zimbabwe crocodile operation, which is the group’s major operation with a 92% contribution to total revenue, turned over $39.22 million – a 37.57% increase from $28.51 million in the prior period while the 44 253 contract skins sold in 2018 represented a marginal increase of 2 percentage points over the volume sold in the previous period.
However, out of the Zimbabwe’s crocodile operation topline, about $10 million are local sales. Operating expenses was up 22% to $13.99 million from $11.42 million previously.
In Zimbabwe staff costs stood at 41% being the largest proportion of business costs and feed costs at 23%. Previously staff costs were at 42% while feed costs 26% so those two of the largest expenses have released about 3% that’s being inherited to repairs and maintenance – this is the effect of local inflation coming in mainly in the last quarter of the year which hit the company’s maintenance and repairs and spares costs quite hard.
In the United States of America, the biggest cost of the business was livestock acquisition and acquisition of hatchlings and yearling costs which constitute 50% of the total expenses. However, the company have a strategy in place to address that, which will improve margins significantly for that business.
A skin condition identified earlier in 2018 on the alligator stock did not clear by year-end. The affected alligators were harvested in the first quarter of 2019 to create space for the younger crop. The quality grade attained on these skins was below expectation. During that the period, export meat volumes down – amended conditions pertaining to European Union exports resulted in the proportion of meat qualifying for export being reduced.
“The EU had prescribed that any meat that was produced in Zimbabwe for export had to go for antibiotic residue testing as part of the standard testing. Those facilities are not available in Zimbabwe and we had been using a laboratory in South Africa and that laboratory lost its accreditation standards,” chief executive Gary Sharp, he said adding that the groups is still negotiating with individual member states they were dealing with so that they prescribe their specific requirements and use one of their accredited laboratories.
Kamundimu told this publication that the group’s first quarter performance looked promising.
“We don’t do much sales in the first quarter but we do have most of our sales start coming through in the second quarter but so far has been steady and keeping our expenses steady. The sales that we have done so far, except for the American operation where we have already taken a fair value write down, we had some carryover skins there which don’t make the quality but after that the normal 2019 harvest, the results have been quite good in terms of quality we are going to where we need to be,” he said.
Padenga completed 90% of the construction work of an additional 470 kWp solar array at its Nyanyana Farm to bring installed capacity to 800kWp to ensure that there is enough power generation.
The Zimbabwe crocodile business is projected to sell 46 000 premium quality skins. In the USA, the group projects to harvest 37 324 skins. The group is pursuing investment into an export business already in existence, it is looking to acquire a controlling stake with transaction advisors appointed and due Diligence processes underway. However, a full disclosure to shareholders will be made at the AGM in early June, 2019.