Delayed recapitalization erodes AICO shareholder value – report

Delayed recapitalization erodes AICO shareholder value – report

By Happiness Zengeni, Harare, Sept 3, (The Source) – The delayed finalization of the capitalization of AICO has destroyed value for shareholders, with the share price losing 68 percent from its October 2010 levels, a report from Imara Africa has shown.

According to the report, the level of borrowing on the balance sheet is unsustainably high and continues to increase.

Speculation has it that the delay was due to major shareholders failing to agree on a plan to recapitalize the company.

After a strategic decision to dispose of Quton to Seed Co, just before dollarization, AICO has weaned off subsidiaries that were of no strategic fit to its vision.

On the proposed restructuring, AICO management indicated that it is working on plans to recapitalize and this is likely to result in the unbundling of the group, with Cottco and Olivine to list separately.

The capital raising is expected to expunge debt and necessitate the restructuring of AICO’s loans.

In addition, AICO expects the funding to grow and sustain current operations after which both Cottco and the FMCG businesses are expected to post significant profitability soon there-after.

Imara said for the FY 2013, Cottco is expected to record lower profits than those achieved in FY 2012 although it is expected to remain profitable.

The group, which is due to announce its H1 2013 results, has since published a warning statement saying the cotton buying season is coming to an end and it is apparent that the level of cotton production this year was much lower than prior years.

“As a result, intake volumes in the cotton strategic business unit are significantly lower than last year. Accordingly, the company will post a loss for the year to March 31 2014 that is substantially higher than the loss recorded in the year to March 2013,” AICO said in a statement.

The company also notified that the company was contemplating a series of transactions to enhance shareholder value.

AICO subsidiaries include Cottco, Seed Co and Olivine.