daniel chigunwe
Michael Tome
Listed wine and spirits manufacturer, African Distillers Limited (Afdis), says the influx of illicit products and growth of imports from the region negatively affected its volume uptake in the year to March 2024.
This comes as the firm posted marginal volume growth of 1 percent compared to last year as consumer demand faltered owing to excessive competition from these products that are usually not compliant with regulations.
The ready-to-drink segment grew 5 percent driven by improved product availability on ciders and consumer activations while the spirit category took a 2 percent decrease.
Wine performance remained stagnant in comparison to the prior year.
The group also highlighted a challenging landscape marked by a weakening local currency, high inflation and inconsistent power supply.
According to Afdis, volumes growth was also disadvantaged by the introduction of the sugar tax on beverages and a 5 percent surtax on VAT non-compliant customers in the fourth quarter of the year.
However, given the unrelenting competition from the informal market, Afdis noted that it would continue to craft measures to defend market share, improve volumes and sustain profitability growth.
The wine and spirits maker also hinted at directing more effort on product innovation and production efficiencies.
“ . . . the period saw a continued increase in illicit products alongside a rise in irregular imports from neighbouring countries, which are usually not compliant with regulations. These developments increased competition that disadvantaged local industries.
“Despite these hurdles, an increase in transactions conducted in United States dollars offered businesses a vital lifeline by providing more access to foreign currency needed to sustain operations,” said Afdis chairman, Matlhogonolo Valela in the full-year financials to March 31, 2024.
Afdis highlighted that it is pinning hopes on improved economic activity.
Highlighting that it is hopeful that consumer spending in the local economy will be spurred by increased activity in mining, government-initiated infrastructure rehabilitation projects, tourism and improved diaspora remittances.
According to the firm, a healthier performance of these critical sectors of the economy has lately been availing disposable incomes for consumption by consumers.
“The economy is projected to continue growing anchoring on infrastructural development, tourism, mining activities and increased diaspora remittances.
“This growth will, however, be slowed down by the El Niño induced drought being experienced in the country and the continued fall of global metal prices,” said Valela.
He exalted Government efforts to stabilise the macroeconomic environment saying the firm remains optimistic that the new currency would be critical in reducing inflation and fostering exchange rate stability.
“The company is hopeful that the newly introduced currency, Zimbabwe Gold (“ZiG”), will help restore stability in exchange rates and tame inflation.”
Operationally, Afdis revenue and costs contribution in USD terms increased to above 80 percent over the period under review.
Revenue for the year to March 2024 grew to US$51,8 million from US$41 million in the prior year while operating income rose to US$6,6 million from US$5, 4 million.
A profit before tax of US$9,7 million was reported from US$3,6 million in the prior year comparative while total comprehensive income came in at US$3,5 million from a loss position of US$3,6 million.
Nevertheless, Afdis was not spared by the dismal economic performance locally as the operating environment posed significant challenges characterised by the rapid depreciation of the Zimbabwe dollar, high inflation and inconsistent power supply.
Afdis said it was also confronted by numerous changes encompassing the shift in functional currency to the US dollar in October 2023 to align with IFRS Accounting Standards.
Though the change was necessitated by economic conditions, it presented challenges in financial reporting and analysis given the exchange rate fluctuations and hyperinflation in the previous currency.
The company declared a final dividend of US$0,0060 per share, amounting to US$1 067 646 in addition to an interim dividend of US$0,0030 per share that was paid in December 2023 bringing the total dividend to US$0,0090 per share.
Bongani Ndlovu