…as current liabilities exceed current assets by $33.6bn
By ETimes
The capacity of Starafrica to continue as a going concern has been seriously questioned by external auditor Grant Thornton, Chartered Accountants (Zimbabwe).
Grant Thornton raised this concern in its audit of Starafrica’s financial statements for the half-year ended 30 September 2023.
The International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity,” guided the Grant Thornton review process.
“We draw attention to note 7 to the interim abridged consolidated financial information which indicates that the group incurred an operating loss before tax of $18.31 billion for the six-month period ended 30 September 2023, and as at that date, the group’s current liabilities exceeded current assets by $33.59 billion,” reads the report.
“As stated in note 7, these events or conditions, along with other matters as set forth in note 7, indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern. Our conclusion is not modified in respect of this matter.”
In the period under review, the group faced serious challenges following a three-month shutdown, a 41% drop in sales volume, the impact of the influx of cheap duty-free sugar imports due to Statutory Instrument 80 of 2023 (SI 80 of 2023), a loss before taxes of $18.31 billion and current liabilities exceeding current assets by $33.6 billion.
Starafrica sole local supplier of the primary raw material, suddenly raised prices, which hindered its capacity to continue generating cash flows.
However, according to the company, the rise was later reversed and an alternate supply was found in Zambia.
“Management has also implemented a turnaround strategy focused on cost containment and improved procurement practices,” the company said in its notes to the interim abridged consolidated financial statements.
Recently, authorities reimposed duties on basic commodities, including sugar.
“A development will positively impact the local sugar industry and the economy through the retention of foreign currency.”
The business remains optimistic despite facing several hurdles in the first part of the fiscal year.
“Despite the challenges faced, management anticipates that the business will be able to generate positive cash flows into the future as demand for the group’s products remains high domestically,” the company said.
“Due to an increase in productivity and sales volumes anticipated in the future, the Group will continue generating sufficient cash flows to meet its daily working capital needs and for capital expansion.”
The company’s inflation-adjusted topline rose 35% to $99.41 billion from $73.52 billion in the comparative period.
But from $4.73 billion in the previous year’s comparable period to negative $29.45 billion for H1 2024, the group’s operating profit fell by 723%.
This was attributed to reduced sales volumes and increases in operating costs in real terms.
The current share price of Starafrica is $9.1611. It began the year with a share price of $8.00 and has since gained 14.5% on that price valuation, ranking it 38th on the Zimbabwe Stock Exchange in terms of year-to-date performance – HARARE