SUGAR processor Star Africa Corporation’s successful debt restructure has helped the company attain a positive net asset value of $1 million in the 2018 financial year, from a net liability position of $41 million last year.
A High Court-sanctioned reconstruction scheme, which has seen the central bank’s Zimbabwe Asset Management Company (Zamco) taking up 58 percent shareholding in Star Africa, has relieved the manufacturer of a huge debt burden.
Statutory pension fund, National Social Security Authority (NSSA), has also taken part in the Star Africa bail out, assuming 31 percent shareholding in the process.
Zamco, created by the Reserve Bank of Zimbabwe (RBZ) in 2014 primarily to mop up bad assets from bank balance sheets, has expanded its remit to bailing out troubled firms.
Both Zamco and NSSA converted nearly $47 million Star Africa debt in exchange for a combined 89 percent control of the company. The converted debt accounts for 70 percent of the company’s encumbrance which is covered by the reconstruction scheme. Zamco was owed $34.5 million, while the debt to NSSA was $11.5 million.
The conversion has the effect of halving Star Africa’s interest burden going forward, the company said in its latest 2018 financials.
Star Africa paid $6 million in finance costs in the 2018 financial year, up from $2.6 million last year.
The interest burden ate into the company’s improved EBITDA, which was up an impressive 95 percent to $3.1 million.
Star Africa managed to narrow its full-year loss to $3.8 million, from $5.9 million in 2017, after sugar sales volumes rose 51 percent to 63,000 tonnes. As a consequence, revenue was pushed 47 percent up to $48 million.
The company’s prospects have been boosted by its certification as a supplier by the Coca Cola Company, a major off-taker. The arrival of PepsiCo on the market presents further opportunity for Star Africa, analysts say.
Management is also upbeat about prospects of opening up export markets in Botswana and central Africa.