Ariston catches Covid-19 cold

TINASHE MAKICHI


The outbreak of Covid-19 is expected to result in a 20% reduction in overall
tea sales for Zimbabwe Stock Exchange-listed Ariston Holdings due to a 10% drop in price on low global demand.


The harvesting has been further slowed down due to a decline in headcount as a result of the implementation of social distancing rules. Export tea sales were also subdued as the movement of tea samples is affected by airlines since the demand for travel plummeted.


“This is expected to result in 20% reduction in overall tea sales.
Reduction in global tea demand has resulted in a 10% reduction in selling
prices. During the lockdown, delays in processing payments by local
bankers constrained the business.


Supply chain disruptions are being encountered as South Africa remains largely on lockdown,” Ariston chairman Alex Jongwe said in a statement accompanying the financial statement for the half-year to March 31.


Pome fruit exports have been negatively affected by the suspension of airline services, hence 1,580 tonnes will have to be locally consumed, Jongwe said.

He said 30% of local pome fruit sales are made through the vendor market and since vendors are generally unable to operate during lockdown, there has been a decline in demand.


Despite the pandemic, harvesting of macadamia, fruit and other horticultural products remained unaffected with adequate labour for the operations existing on the Estates.

Macadamia export sales remained firm as orders are on hand for the entire current season crop, Jongwe said.


Ariston posted a 23% increase in inflation-adjusted revenue for the half-year to March 31, 2020, to ZWL$76.07m from ZWL$61.82m on realised during the comparative period last year.


Jongwe noted that revenue growth was driven by improved pricing achieved on macadamia due to quality improvement as well as improved local pricing of horticulture products sold during the period.

Costs of production during the period increased 47% relative to the prior comparative period as a result of local suppliers using an implied exchange rate greater than the interbank rate, thus driving costs upwards.

Export
revenues were, however, converted using the interbank rate while
operating expenses were kept under control despite inflationary pressures, reducing by 17% against the prior comparative period.


The group posted a loss from operations for the period of ZWL$14.77m which was down 25% from the prior comparative period’s inflation adjusted loss from operations of ZWL$19.79m.


Overall, the group posted a loss before interest and tax of ZWL$8.96m compared to a profit of ZWL$33.49m for the prior comparative period.


“The current period loss is largely driven by the fact that the ZWL
revenue recognised on export crops are determined by converting the
US dollars (USD) earned using the interbank rate, which lags behind inflation, whilst inflationary pressures exist on production costs, hence resulting in reported performance reflecting losses,” Jongwe said.


He noted that positive steps continued to be taken in the restructuring of the group’s statement of financial position and the group’s debt tenures remained largely long, however, the weighted average interest rate increased to 8% per annum from 6% per annum.


Tea production volumes declined by 2% to 1,870 tonnes from 1,907 tonnes produced in the prior year comparative period while the current period export tea sales volume and USD selling prices declined by 36% and 8%
respectively.


Export tea sales were affected by high global tea production volumes,
coupled with Covid-19 closures of companies that purchase the product.


“Given the reduced demand resulting from the effects of Covid-19, we believe that this low demand trend will persist for the remainder of the financial year,” Jongwe said.


Current period local blended tea sales volumes and selling prices improved by 31% and 841% respectively against the prior comparative period.

This was largely driven by improved marketing of the product locally.

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