Cafca Limited has downgraded production to 100 tonnes per month from 200 tonnes as the company seeks to cut costs in light of depressed copper prices as well as its suspension of exports.
Managing director Rob Webster giving a trading update for the four month period to January 2016 said until copper prices improve, the company will operate under the 100 ton model until year end.
“The gains we had achieved of moving the company from 200 tons to 300 tons per month had to be reversed in October; we have to build the business to 100 tonnes in order to cut costs.
“We have put the cost base down up to a 100 tonne model which means we will have sales of $2 million a month that will translate to $100 000 profit per month,” he said.
Mr Webster said copper prices are down to $4 400 from $6 500 and the impact of that on the business is that 100 tonnes will be giving the company $900 000 sales. Costs have reduced from $700 000 last year to $600 000.
According to the MD, as at end of January, on year on year basis, volumes are down 25 percent; sales down 31 percent and profit down 84 percent.
Mr Webster said the company could have reacted a bit quicker knowing that the economy was going to turn but unfortunately getting out of that system was not easy.
“That is how we will sit for the rest of the year, the reason being that a lot of factors affecting us are also linked to those affecting Zimbabwe’s economy.”
Mr Webster said the company has since suspended exports to South Africa, Malawi and Zambia due to the weakening of the regional currencies.
“Our copper being generally expensive compared with other markets, the option to export to South Africa is no longer there and exports to Malawi and Zambia have also been curtailed,” he said.
Mr Webster said the company is currently exporting to Mozambique’s Tete province where the prices have remained firmer.
“In this regard, options to recover the situation are not there,” he said. Mr Webster said “focus will be to keep the costs down and keep business on 100 tons per month.”
Mr Webster said the company is going to issue a profit warning after this agm, and another warning in March.
Borrowings which were at $1,8 million at end of year have since been cleared and Mr Webster said the balance sheet remains strong as there are no debtors hence it’s just getting and banking $2 million every month.
“It is dire but we will come through with a strong balance sheet at the end of the year.” — Wires.