ZSR sugar business makes a loss of $230 million

The current shortage of sugar is due to smuggling and parallel market sales where it is being sold at up to three times the government controlled price.

ZSR Corporation says in its report for the six months to September, the price of sugar on the local market is now a fraction of that obtained in the neighbouring countries both because of the price control and the run-away parallel market rates of the Zimbabwe dollar against regional currencies.

As a result significant quantities of sugar are being smuggled out of the country.

The company says it has identified ways to stop the smuggling and has submitted its proposals to the government.

Its sugar business made a loss of $230 million in the six months to September, largely because of the price controls. Last year it made a profit of $118 million in the first half.

Although the government increased the controlled price of sugar by 50 percent on 16 July, the company says the increase was inadequate and was a little too late to make any meaningful impact on the results.

The industry expected a similar increase in October but this was not granted.

Domestic sales were down from 113 055 tonnes last year to 106 029 tonnes. This was largely because of production stoppages at the Harare Refinery when it ran out of coal because the National Railways of Zimbabwe failed to move the raw material.

It says about 16 000 tonnes of production was lost due to these stoppages.

Exports declined by 9 percent to 16 437 tonnes.

Other operations of the company, however, did exceptionally well.

The company had a total turnover of $14.5 billion, up from $7.4 billion.

Operating profit shot up from $374.8 million to $921.3 million with the sugar business making a loss of $229.8 million while other business brought in $1.1 billion, a 387 percent improvement from the $230.8 million realised last year.

Profit attributable to shareholders more than doubled from $249.2 million to $563 million.

Red Star and Polyfilm contributed 68 percent of the profits.

The only business that did not do well was Kabwe Industrial Fabrics which continues to be affected by low demand.

The associate company in Botswana brought in $28 million, up from $26 million last year.

The company also spent $361 million on capital expenditure. This was mainly on the Harare Refinery, the establishment of a new outlet for Red Star in Harare and the purchase of 10 new vehicles for Bluestar transport.

The company says the continuation of price controls will worsen the depressed performance of the sugar business.

" Without corresponding price controls on major inputs such as rail, coal, electricity, packaging, salaries and wages and maintenance costs, the sugar business will continue to sustain losses, unless reasonable and timeous price increases are awarded by government," it says.

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