Despite the severe deterioration of Zimbabwe’s macroeconomic conditions that significantly reduced consumers’ disposable incomes that generally compromised product demand, African Distillers (AFDIS) posted a stronger than expected performance in the six months to June 2019.
The wine and spirit maker saw its top line grew by 98 percent to ZWL$60.6 million during the period under review from ZWL$30.6 million in the same period in prior year.
The top line performance was impressive on the context of what was likely to be another muted first half wines and spirits reporting period, due to depressed disposable incomes. The company did report improvements in a number of other key indicators.
The financials released last week show the company’s operating income went up 257 percent to ZWL$25.4 million from ZWL$7.1 million in previous comparable period.
AFDIS chairman, Pearson Govero said: “The significant operating income is as a result of volume upsurge, supply chain cost management and inflation driven price adjustments.”
Profit for the period was 248 percent up to ZWL$18.1 million from ZWL$5.3 million in prior year. Total assets grew 103.5 percent to ZWL$81.8 million from ZWL$40.2 million in prior period.
The company said it registered a volume growth of 17 percent on prior year, largely from the first half to December 2018. Spirits increased by 21 percent, ready-to-drink by 18 percent, while wine registered a decline of 10 percent. Production innovation within the gin and vodka segments significantlya contributed to the overall spirit category volume growth.
Deloitte Zimbabwe, the company’s auditors, like others, issued an adverse audit opinion. The key audit matters were on valuation of expected credit losses on trade and other receivables, valuation and disclosure of prepayment and change in financial reporting.
In the outlook, Govero gave a gloomy picture.
“Macroeconomic conditions continue to deteriorate, further reducing consumer disposable incomes and compromising product demand. Post year end, the government changed duty structures effectively doubling excise duty on company products. Affordability is likely to be a challenge going forward,” he said.