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Colcom's expects revenue to rise by 20 percent

by Business reporter
06 Sep 2012 at 15:04hrs | Views
Colcom has projected its revenues to increase by 20% in the current financial year to June 2013 while the pretax margin is forecast to ease by a percentage point to 12.7%, group CEO Theo Kumalo told analysts this morning.
 
The group expects to spend about $5.6 million on capital expenditure (capex) in F13 mainly on emulsification equipment, the pie line and acquisition of generators.
 
"As part of our strategy to increase operational efficiencies and productivity through the factory, we plan to increase the Colcom factory's emulsification capacity because of the growth in polony and individually quick frozen foods (IQF), upgrade technology in the pie factory and acquire another modern swing compressor for refrigeration in the current financial year," he said.
 
Kumalo added the group would invest in 2x 1000 Kva and 2x 500 Kva generators "a power station on its own" to cope with power supply problems. He added that one of their factories had been placed on official load shedding schedule.
 
The group is also focusing on increasing distribution footprint across the country "to ensure market saturation in areas where we are not sufficiently covered".
 
He said Colcom has embarked on a phased plan to increase its distribution channels, and in the process to help meet differing market requirements.
 
"In addition to the Colcom Shop here at the factory, and The Colcom Kitchen in Borrowdale, we have now established another shop of our own at Mbudzi on the highway to Masvingo," he said.
 
The first 3 test case franchised shops in Harare are Park Street, Machipisa and Makoni. "We also have 3 franchised shops in Bulawayo and one in Gweru and it is intended to extend such shops nationwide".
 
The Colcom Kitchen, which is designed to expand the group's customer and consumer services, in Borrowdale has been in operation over the past year and has proved very popular with different groups.
 
Kumalo also said the group would explore regional export markets and that they were already in Malawi and were in discussions with customers in Mozambique. They were also looking at Namibia very soon.
 
At Triple C Pigs maize needs have been secured up to the end of January 2013 and "we continue to buy from the farms," Kumalo added. Soya bean needs have also been secured until the next harvest in April 2013.
 
Commenting on factors that affected the operating environment Kumalo said liquidity challenges were affecting disposable incomes and demand while availability of power and water remained a challenge with the group going for about a week in the second half without water and electricity and this he said created the need to put aside significant amount of capital for generators and boreholes.
 
The group also faced competition from imported cheap protein especially chicken, and ageing equipment was also affecting their operations.
 
"The group continued to achieve a higher turnover, profitability growth and cash generation during the year, despite all these challenges," he noted.
 
Giving an operational overview Kumalo said the group had realised growth in Pig production of 4% at Tripple C while genetics were renewed as per plan and managed to secure adequate cover of stockfeeds.
 
 3 sites at Triple C for Breeding, Growing and finishing and automatic feeding system were installed and completed at the Grower site.
 
"This feeding system is designed to enhance efficient utilization of feed and increase growth rates (stockfeeds are major cost factor). The intention is to install the feeding systems at all 3 sites at Triple C," Kumalo said.
 
In manufacturing, a new swing compressor and condenser have been installed and commissioned during the course of the year. A new co-extrusion sausage machine was also successfully commissioned during the past year.
 
A new spiral freezer and packing line was also installed and linked to the new co-extrusion sausage machine.
 
"Spiral freezer freezes pre-portioned, pre-cooked and chilled sausages from the new co-extrusion sausage machine to -18ºC in 45 minutes.
Customers therefore obtain individually quick frozen pork, beef and chicken sausages in different size packages according to their needs. The IQF process is time and cost saving," Khumalo said.
 
The group introduced new products in form of Pork, Chicken and Beef Bangers, (produced by the new co-extruder, spiral freezer and packing line) on the market late last year.
 
"They were a 'first' in Zimbabwe, and their taste, quality and competitive price have proved very popular. Volumes have exceeded the figures used to justify this investment," Kumalo noted.
 
"In line with our continued range extension, Bacon Polony has been successfully launched," he added.
 
"While strongly associated with pork, research indicates that the Colcom brand equity is transferable to non-pork products. We have recently developed a Tastee Chicken Polony which has become a major contributor to polony volumes," Kumalo said.
 
As part of the group's continued focus on cold chain distribution, Colcom is steadily replacing old delivery trucks with new refrigerated vehicles.
 
Commenting on the joint venture with Associated Meat Packers (AMP), Kumalo said an AMP shop was opened next to its processing factory in the Colcom complex in April this year and has opened 5 Texas Meats retail butchery shops. AMP expects to open 2 shops a quarter and would target the high density areas as well as improve its footprint throughout the CBD and outlying areas.
 
Presenting the financials group FD Kenias Horonga said revenue at $52.85 million was 14% up on last year's $46.20 million while basic EPS amounted to 2.87c which was an 8% reduction on last year mainly due to improved profitability in the group's subsidiary (AMP) resulting in higher non-controlling interests charge.
 
Operating profit growth was limited to 8% at $7.224 million due to introduction of entry level products with low margins. PBT grew by 6% on prior year to $6.439 million.
 
Pig production at Triple C grew by 5% while overall slaughtered pigs increased by 4% of which Horonga noted these were the pigs they slaughtered for internal use. Pigs slaughtered on behalf of others were up 13%.
 
Throughput increased by 32% mainly due to the introduction of IQF bangers. Pork Sales volume grew by 31% while AMP sales volumes increased by 55%.
 
"All the above combined to result in a revenue growth of 14%. Overheads grew by 13% mainly due to staff statutory wage increases and utilities," Horonga said.


Source - zfn