eBusiness Weekly
Panashe Chikonyora
African Distillers Limited (Afdis) registered a 35 percent decline in its volumes for the six months ended December 31, 2019 owing to “harsh trading environment which was characterised by rising inflation, declining disposable incomes and shortage of foreign currency”.
Several economic challenges such as hyperinflation, declining disposable incomes, foreign currency, fuel and power shortages have been weighing on many businesses in the country, with some even stopping operations.
Increases in the costs of inputs have resulted in low consumer spending as their disposable incomes are not in tandem with the rising inflation, while foreign currency, fuel and power shortages have become a major disruption to many business operations as they have resulted in shortage of raw materials and high operating costs, imposing a negative impact to the development of the economy.
“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 while considering consumer affordability.
“The company registered a volume decline of 35 percent on prior year. Consumer trends have shown a shift from premium and mainstream segments to value products in reaction to the erosion of disposal incomes. Performance of the spirit segment was negatively impacted by the prevalence of counterfeits and illicit alcoholic beverages,” said Afdis in a statement accompanied by the financial results.
However, Afdis remained sustainable as its replacement cost pricing drove revenue and operating income up by 25 and 15 percent to $223 million and $62,7 million from $178 million and $54,4 million respectively, despite the harsh economic conditions that weighed on its operations.
Net funds were at $45,5 million with most of it “awaiting foreign currency allocation at the banks to enable funding of external supplies for business continuity”.
Meanwhile, although Afdis said it expects a continuous decline on the volume and margin performance due to the “shortage of foreign currency, hyperinflation and poor agricultural season”, it said it will continue looking into new strategies that benefit the market to ensure business continuity.
