Colcom’s markets are largely confined within Zimbabwe, but management has hinted regional expansion.

REVENUE for the first quarter of 2017 at food processing company, Colcom Holdings, rose slightly higher than prior year comparable period largely on increased volumes traded.

Speaking at the company’s annual general meeting on Friday Colcom’s group chief executive officer Dino Tumazos said the increased revenue could, however, not be directly translated to mean a growth in gross profit due to the reduction in average selling prices.

“The reduction came about primarily from a direct reduction in prices of products across the whole range of products over the prior year comparable period, but was compounded by a significant shift in sales mix from processed foods to fresh meat and carcass sales,” he said.

Colcom specialises in rearing livestock, processing and packaging of pork, beef and chicken meat products. Through its subsidiaries and associates, Triple C, Colcom Foods, Associated Meat Packers and Freddy Hirsch, Colcom controls an entire meat processing value chain.

While Colcom Foods volumes were up, competitive pricing in the market and a significant shift in the sales mix held back the growth in revenue to modest levels.

“The group managed costs further with all business units achieving modest savings in operating expenses over Q1 prior year. The result of the above is a profit before tax marginally ahead of that achieved in the comparative period last year,” Tumazos said.

While growth has slowed across the wider Zimbabwean economy, the innovation and focus entrenched in Colcom’s culture has kept revenue growth in the double digit range.

Colcom finds itself in an industry that almost guarantees excellent long-term results. Branded foods producers have a propensity to earn superior returns on capital largely because of ever rising demand that stems from population growth and urbanisation.

At Triple C Pigs, the pig production facility came on line in March 2016 and added 150 pigs per week to output. The additional delivery of pigs has allowed volume growth in carcasses, but fresh pork competition had partly eroded market share gains achieved during the current reporting season.

Tumazos said the increase in volumes had naturally contributed to an increase in revenue at Triple C, but unfortunately the cost of key raw materials specifically maize has increased significantly, offsetting the benefits of production efficiencies achieved.

At the end of the quarter, the cost of maize charged to production was 15 percent higher than that charged in prior year. The regional shortage of maize will result in further increases in raw material prices before the next harvest.

Currently, Colcom’s markets are largely confined within Zimbabwe, but management has hinted regional expansion. Certainly its free cash flows allow for these expansion ambitions to come to fruition although no concrete plans have been announced as yet.

Over the years Colcom’s competitive advantage has flowed from a carefully crafted corporate culture that is fiercely focused on profitability and the delivering of a quality product.