Low disposable incomes weigh on Farm and City

Enacy Mapakame Business Reporter

Farm and City Centre (FCC) had a depressed performance during the half year to March 31, 2023 as the obtaining environment remained challenging resulting in low disposable incomes.

FCC is CFI Holdings Limited’s retail segment and its biggest revenue contributor.

Despite a good rainfall season, inflationary pressures and exchange rate volatility weighed on consumer spending.

“The half year ended 31 March 2023 was challenging due to prevailing multiple exchange rates, high-interest rates and reduced consumer spending, thereby decreasing key revenue driver volumes.

“The division, as with a number of the larger corporates in the country, suffered a loss of value on USD settled sales as a result of the progressively widening gap between the interbank exchange rates and the unofficial rates. “The lower interbank exchange rate was used to credit accounts in respect of the mandatory liquidated fund,” said chairperson Itai Pasi.

During the half-year period, the operation contributed 79,8 percent as the segment remains the group’s cash cow, although this was a decline from comparable period’s 84,8 percent.

The slowdown in FCC had an adverse impact on the performance for the entire group, whose other segments were also exposed to the tough operating environment that prevailed in the country during the review period as well as the macro-economic challenges.

“Hyperinflationary pressures maintained during the first six months, which ended March 31 2023, making the economic environment generally difficult on the back of falling consumer buying power.

“This was aggravated by the pass-through negative effects of the war in Ukraine on global supply chains and the prices of key imported commodities.

“The trading environment also witnessed the resurgence of acute power supply shortages affecting the Country’s productivity levels and increasing the costs of doing business,” she said.

Overall, the group’s revenues for the half year increased marginally by 13 percent to 34,09 billion compared to $30 billion recorded during the same period in the prior year. The increase in revenue was not enough to offset the challenges posed by exchange rate volatility and inflationary pressures.

Ultimately, selling price adjustments lagged behind expenses as selling prices were determined in line with official banking exchange rates whilst expenses increased in real terms and were pegged in US dollar, converted by suppliers and/or providers to local currency at prevailing parallel market exchange rates.

According to the group, the company incurred unrealised exchange losses of $6,6 billion on its foreign currency denominated loans and creditors.

As a result, the group posted a loss before tax of $9,13 billion against a profit of $1,14 billion from the comparative prior year period.

The group is downbeat about the economic environment in the short to medium term and therefore putting in place measures to cushion itself against the harsh environment.

“In view of the challenging economic conditions which prevailed during the period, and have since worsened thereafter, the group foresees the trading environment remaining challenging and complex in the medium term.

“Proactive management practices will therefore be employed to ensure the Group’s survival in these difficult times,” said Ms Pasi.