Cottco Holdings Limited (Cottco) registered a 48% growth in cotton deliveries in 2023.
The company published its trading update for the year from 01 July 2022 to 31 August 2023.
“As the buying season draws to an end the Company has achieved a 48% increase in intake from 46,748 metric tonnes in 2022 to 69,146 metric tonnes in the current season”, the update read.
Turning to payment of farmers, Cottco advised that they had paid US$15.9 million to farmers to date. The remaining 32% is expected to be cleared in the month of September 2023 as market liquidity improves.
The increase in cotton production this season follows the Government’s timely intervention with lucrative cotton prices and the classification of cotton as an export crop.
This year, Zimbabwe is targeting US$70 million from cotton exports. This is in addition to the cotton lint that is bought locally, and more is being bought as David Whitehead under its new owners is installing spinning and weaving machinery.
International lint prices have firmed from US78c/lb at the beginning of July 2023 to US88.76c/lb in recent weeks due to the Northern Hemisphere crop being under threat from drought conditions.
The world has registered a decline in production by 2.7 million bales, while consumption saw an increase of 500,000 bales causing prices to firm.
Oil seed prices saw a decline in the period under review as local and regional supply of soya and sunflower seed increased against a stable local demand from oil expressors.
The company has implemented cost containment strategies since 2022 which are expected to improve margins in the year ended 31 March 2024.
These include a 100% roll out of Smart farmer, an Enterprise Resource Management system enabling a real-time capturing of farmer information, which cut back on physical stationery costs as well as employment of data capturing clerks.
Going forward the company expects marginal profits for the year ended 31 March 2024.
The company changed auditors. KPMG Zimbabwe who had been on the company’s books since 2001 were replaced by BDO Zimbabwe Chartered Accountants.
The change is in line with the requirements of the Companies and Other Business Entities Act (Chapter 24:31) and the Zimbabwe Stock Exchange Listing Rules, which discourage engagement of an auditor beyond a period of 10 years.
The proposal for the government to increase its shareholding in the company is still ongoing. The Ministry of Finance and Economic Development appointed Grant Thornton to perform a Financial Due Diligence on the entity which was completed in August 2023.
Cottco is currently led by the Acting Managing Director, Mr. Munyaradzi Chikasha (Head Operations).
A substantive Managing Director will be appointed in due course.
The company appointed a substantive Company Secretary, Ms Eunice Mupanduki with effect from Monday 28 August 2023.
The intervention by the Government on cotton production through the Presidential Inputs Support Scheme was has revived the sector, which was collapsing due to low prices offered by merchants and other problems related to inputs.
Some farmers in cotton growing areas had abandoned the crop after prices fell and merchants had reduced input packages citing side-marketing by farmers, further affecting production.
At peak, Zimbabwe produced 351 000 tonnes of cotton in the 2010/11 season and the Government has since set a target to raise production to 300 000 tonnes by 2025. Zimbabwe mainly uses open-pollinated varieties but indications are that production could go up to as much as 600 000 tonnes with the use of hybrid seeds.