LILONGWE-(MaraviPost)-The board for the problem-ridden AHL Group have a serious headache on how to resolve challenges facing Malawi Leaf Company Limited – a subsidiary which is now struggling to survive having posted a record MK44 billion loss.
It has been learnt that this huge loss came about as a result of poor sales coupled with accumulated interests and carrying charges between 2013 – 2017.
At the 57th annual general meeting (AGM) of AHL Group, which was held on December 11, 2020, the shareholders resolved to form and constitute a Task Force that would work to review financial and operational status of the company and its subsidiaries.
While it has been generally speculated that the loss of MK44 billion at Malawi Leaf was a case of negligence and theft, the taskforce, which has already submitted a report to the board, has established that the loss was generally to do with a poor business environment “where MLCL relied more on one unreliable customer”.
The taskforce has suggested that MLCL be given a chance to operate some more with an improved business model that should allow it trade with a variety of customers and should not enter into any contract with farmers to “avoid accumulating stocks” in case there are no willing buyers.
The taskforce has also recommended that the tobacco firm should venture into cannabis production as another sustainable mechanism amidst declining interest on tobacco both from government and international market.
The board has already started deliberating on the report from the taskforce and has a divided opinion on what should happen next. Some members of the board are of the view that the company should be closed and handover its assets to ADMARC while other think Malawi Leaf can be given a fresh lease of life considering that the losses posted were generally out of control.
“Members observed that MLCL over relied on its two major customers namely China Tobacco International (CTI) of China and Eastern Tobacco Company Limited (Eastern) of Egypt.
Additionally, Members were informed of the buy to order resolution passed by the MLCL Board in 2018 after the Company posted its biggest loss in 2017” reads part of a raw confidential report from the board which is still work-in progress.
According to Malawi Leaf Board member who spoke on condition of anonymity – the loss posted by the company is justified and “records will show that there was no fraud as reported elsewhere” but “any investigation on the matter is welcome”.
Malawi Leaf already have some accumulated volumes of tobacco and has running contracts with some international buyers hence winding up its operations means that the company has to first honour its contractual obligations.
During the review exercise, Members (board) were also made aware of the Group’s intention to venture into the Cannabis business through MLCL. Members, however, were of the view that MLCL should not venture into Cannabis business before issues of stock pile are resolved” said one board member.
MLCL, according to records, is sitting on 4.6 million kilograms of processed lamina financed by the Export Development Fund (EDF). Of the 4.6 million kilograms, 2.9 million kilograms was Burley, 1.4 million kilograms was Dark Fired tobacco and 0.4 million kilograms was Flue Cured tobacco.
The records further show that the stock carrying levels are still high due to the effects of the covid-19 pandemic which affected the issuance of shipping instructions and the imposition of trade restrictions internationally.
It is reported that for the upcoming 2021 selling season, the indicated volume to be purchased under the agency arrangement with Watergen were 3,000,000kgs of unprocessed Burley tobacco and 1,300,000kgs unprocessed Flue Cured tobacco. With these developments, it is unlikely that Malawi Leaf may close shop this year until this business is sorted out – said the board member