THE injection of long-term capital into Victoria Foods and the debt restructuring initiative is projected to induce positive performance for diversified CFI Holdings Limited.
Garikai Tunhira
The group says it is optimistic of the future performance of the subsidiary and that an investment in working capital would be strategic in maintaining and improving its market position.
In a statement accompanying its financial results for the half year ending March 31, CFI Holdings chairman Simplisius Chihambakwe said CFI is also set to partner a South African firm, Grindrod Trading, to recapitalise Victoria Foods.
Under the terms of the proposed transaction, Victoria will issue 812 841 new shares to Grindrod, representing 49% of the company’s issued shared capital.
He said the South African firm would pay $3,25 million as the subscription price, while at the same time it would provide Victoria Foods with a $2,75 million loan.
Chihambakwe said the injection of the long-term capital and the debt restructuring exercise was expected to yield positive results “with the enhanced working capital position positively impacting inventory levels and revenue generation”.
He said under their specialised units, Kobenhavn was disbanded at the end of the half year period under review, while little progress on the joint venture was seen at Maitlands.
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The group chairman said trading environments for the major subsidiaries continued to be attractive with strong local demand and legislation that continues to support local production and processing of foods.
CFI Holdings also plans to divest from non-core assets.
“CFI will continue to seek to exit these investments and will inject the proceeds of such disposals into continuing operations along with capital raised from the ongoing transactions,” Chihambakwe said.
CFI Holdings has three divisions – retail, specialised and poultry.
Group turnover for the half year declined by 13% to $48 million compared to $55,4 million achieved in the comparative period.
Revenue also declined by 25% and 28% for poultry and specialised divisions respectively due to inadequate working capital.
CFI said growing demand for hardware and agro-inputs in the retail division saw the unit register an 8% revenue growth during the period.
Of the total turnover, poultry division contributed 42% (2012 H1 – 50%), specialised unit 11% (2012 H1 – 13%) and retail 47% (2012 H1 – 37%).
The group posted an operating profit from continuing operations before depreciation and financing costs of $553 297 against $272 360 of last year’s.
