admin
Enacy Mapakame Business Reporter
Local businesses continue to feel the strain of the present economic environment, with African Distillers Limited (Afdis), recording a 35 percent decline in total volumes for the half year to December 31, 2019 compared to same period in the prior year, as consumer demand wanes.
During the period under review, the economy was battling foreign currency shortages and high inflation that resulted in serious erosion of disposable incomes.
Market watchers have previously argued that products like Afdis’ wines and ciders, aimed at middle-income to high-income earners are likely to remain unmoved. But the past year has seen prices of goods significantly go up due to inflation, severely cutting on most consumers’ spending power.
Latest figures show that annual inflation for the month of February was at 540 percent, which means prices of goods and services went up by 540 percent between February 2020 and February 2019.
This has seen the market making a shift towards basic goods and value brands in line with declines in disposable incomes, although Delta Corporation has also suffered from the same problems with volumes declining, reflective of the broader economic environment where consumers are cash squeezed.
“Consumer trends have shown a shift from premium and mainstream segments to value products in reaction to the erosion of disposable incomes,” said Afdis chairman Pearson Gowero in a statement accompanying the financials for the six months under review.
Performance of the spirit segment was negatively impacted by the prevalence of counterfeits and illicit alcoholic beverages.
On financial performance, profit for the period fell 71 percent to $10 million from $37 million that was achieved during the same comparable prior year period.
Basic earnings per share went down 71 percent to 9,37 cents from 32,44 cents recorded during the same period in 2018.
Revenue rose 25 percent to $223 million for the six months under review compared to $178 million that was recorded during the same period in the prior year.
Operating income grew 15 percent to 62,7 million from $54,4 million driven by replacement cost pricing.
Added Gowero:
“The company’s results for the period under review were achieved in a harsh trading environment characterised by rising inflation, declining disposable incomes and shortage of foreign currency. Faced with these circumstances, the company had to frequently review prices whilst considering consumer affordability.”
Net funds were at $45,5 million most of which was awaiting foreign currency allocation at the banks to enable funding of external supplies for business continuity.
Total assets grew by a marginal 3,1 percent to $427 million.
Gowero acknowledged the challenging operating environment which poses uncertainties in near future, mainly due to foreign currency shortages, hyperinflation and poor agricultural season.
Without an immediate solution to these challenges, in addition to erratic power supplies, businesses across sectors will have a tough time as this will negatively impact on volumes and margins performance.
Management, however, indicated they will continue to explore strategies designed to best serve the market and ensure business continuity.
The spirits and wines maker declared a dividend of 10 cents per share.
By close of Wednesday trade on the local bourse, Afdis was pegged at $6,18, which represented a growth of 20 percent week on week.
Online Reporter