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lowest since dollarisation.
The company opened the year trading at US7c but after issuing a loss warning statement last week, its share price traded in the negative.
starafrica shareholders have lost about US$8 million since the beginning of the year – the company was valued at about US$13 million in January this year.
The group now valued at about US$5,1 million has 517 607 667 shares in issue.
The company delisted its wholesaler Red Star from the Zimbabwe Stock Exchange last December to become a division of the group.
starafrica’s problems started when its subsidiary, Red Star, was operating at a loss.
Post-dollarisation, Red Star failed to raise US$15 million to restock the group with a view to raise capacity utilisation from an average of 33 percent to about 70 percent.
Apparently, the sugar wholesale business remained attractive, considering that Red Star managed to rake in US$54 million in revenue in the full year to March, but this was achieved on the back of US$48 million cost of sales.
The company had also suffered from increased competition in the retail sector. Throughout 2009/2010 Red Star tried to maintain its extensive branch network and distribution capacity but overheads had a significant impact on profitability and cash flow.
High levels of accumulated debt also resulted in critical cash flow problems.
starafrica unbundled Red Star as a separate entity and subsequently listed the division on the ZSE in 2006 in efforts to unlock shareholder value, but viability constraints and onerous liabilities seem to have cut short its autonomy.
starafrica has also failed to return to profitability despite completing a successful recapitalisation drive last year.
The group was on the market to raise US$20 million through a rights issue offer and a private placement of convertible debentures to ABC Holdings Limited.
Its rights issue closed with 29,1 percent subscription level – representing a substantial dilution of shareholders.
Despite the liberalisation of the economy in February 2009, companies have continued to operate below their potential due to lack of funding.
Banks have largely failed to support local industries and the only available expensive short-term financing has resulted in companies reeling under unsustainable debt.
A number of listed companies have shown stress for funding, resulting in companies rationalising or down-scaling operations.
Some companies are negotiating for possible mergers while others are planning to delist from the bourse as a way of rebuilding value and attracting new investors.