Obtala Resources' own fruit plan further expands Morogoro operations

Proactive Investors | 13 October 2014

(Note: Through its subsidiary Montara Continental, Obtala Resources operates a farm in Songea in Southern Tanzania where it has lease rights to 20,000 ha. It also has a 9,875 ha DUAT for farmland in the Namuno District, in Cabo Delgado, Mozambique.)

Obtala Resources' own fruit plan further expands Morogoro operations

By Philip Whiterow

The company said the fruit orchards would offset costs made from buying in fruit from contract farmers

Obtala Resources (LON:OBT) continues to expand its agricultural operations in Morogoro, Tanzania - revealing it had taken a lease on  a chunk of agricultural land there, aiming to plant orchards that could save it US$1mln a year.

The land covers 204 hectares, is 235km from the port at Dar es Salaam and is next door to Obtala’s existing tomato, fruit and pepper farm.

The company said the fruit orchards would offset costs made from buying in fruit from contract farmers. The additional land will allow for expanded revenues and cost savings and mean it will not need to buy in.

It will hold an 80% interest in the management company that will run the plot with a local partner holding the remainder.

A lease over the land will run for an initial 15 year period renewable for a further 15 years thereafter.

The production of the fruits will dramatically benefit financially from the incentives gained from the recently awarded Export Processing Zone licence (EPZ), Obtala also noted.

Using mango saplings from the local government nursery, Obtala wants to plant a 60 hectare orchard, containing 20,000 mango trees. The group is also looking at planting pineapples, with two crops expected over 30 months.

Grahame Vetch, director of Agriculture,  said: “With this new block we will look to create fruit orchards that require low upfront capex and have low annual operating costs.

“The value of the crop will enhance as the trees grow and the concept of the value added packaging and branding under the Mama Jo's label presents an exciting opportunity.

“In the meantime we are buying in fruit from contract farmers but will be able to harvest our own crop in the near future providing significant additional cost savings."

Africa- focused Obtala has two food food processing businesses. One is in Tanzania, while the other is a cannery in Lesotho. It also has a rapidly growing timber business in Mozambique.

Morogoro started life utilising dried tomatoes, but more recently the firm has identified the excellent potential to process and sell other dried fruits abundant within the region, specifically, mango, pineapple and bananas.

The firm is also mulling building a canning facility at Morogoro, which would mean a considerable increase in volumes. The plan is to produce both canned and glass jar products which will deliver increased revenues.

Last month, in half year numbers, the firm said its latest business concept was to create distribution outlets to sell its branded products and other lines at low prices.

Obtala has secured lines of clothing, footwear, fashion accessories, household consumables, timber products and furniture

In the six months to end June, revenues were £1.2 mln (2013: £148,000), driven by strong sales in forestry and agriculture operations.

Obtala shares eased 1.33% to 9.25p.
Original source: Proactive Investors

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