BUSINESS REPORTER
Zimbabwe’s largest tea producer, Tanganda Tea Company Limited is optimistic about its future despite the tough economic conditions, Business Times can report.
This comes after Tanganda’s profitability decreased by 10% to ZWL$9bn in the third quarter to June 30, 2023 from ZWL$10bn reported in the prior comparative period as a result of a decline in the volume of plantation crops.
Bulky tea production also fell 4% in the period under review. Export volumes fell by 12% compared to the prior comparative period.
The quarter under review was characterised by rising inflationary pressures, currency volatility and rapid changes in the policy environment.
However, company secretary Sharon Kodzanai, is optimistic that the company will turn its fortunes around in the future.
According to Kodzanai, Tanganda has a number of value-adding projects in the pipeline that will boost profitability.
She claimed that management was putting an emphasis on cost management efficiency as well.
“Demand for our products remains fairly strong in spite of the impact of complex macro-economic factors. The confidence from our customers and their support including the value addition projects in the pipeline for our plantation crops will see profitability increasing especially as management focuses on efficiency in managing costs,”Kodzanai said.
Revenue for Tanganga in the quarter under review, however, grew 45% to ZWL$ 32bn from ZWL$22bn reported in the same period last year.
But, packed tea sales volumes were 7% below prior year as the rapid decline in local currency saw volumes with some of the major customers decreasing and the company continued to develop alternative trading channels to counter this impact.
Macadamia production was in line with the prior year.
The marketing season for macadamias began earlier than in the previous year, with 260 tonnes of the crop from the current year and 475 tonnes from the previous year’s crop already exported.
Avocado production was 38% lower than the prior year as a result of biennial bearing phenomenon coupled with the impact extensive pruning carried out on 55 hectares of mature trees to rejuvenate them.
Kodzanai said the difficult operating environment affected the company’s performance.
“The quarter under review was characterised by rising inflationary pressures, currency volatility and rapid changes in the policy environment. The exchange rate moved by 646% to a peak of ZWL$6949: US$1 during the quarter from a base of ZWL$932: US$1, putting further pressure on costs.
“Pricing of products and credit terms have been affected by exchange rate volatility coupled with fluctuations in market liquidity. However, we anticipate the resultant value chain pricing distortions to self-correct over the ensuing period as players run down stocks,” she said.
The company’s investment in solar has begun to pay off by lowering power costs.
Furthermore, since the synchronization of Hwange Power Station units 7 and 8 to the national grid in June 2023, the power supply in the country has significantly improved.
According to Kodzanai, the future of power supply looks bright thanks to both own solar system investments and improvements in ZESA’s electricity supply.
Cumulatively, rainfall received on the estates has been in line with the company’s ten year averages , however, winter rains have been lower than past years affecting tea production in winter.
Kodzanai predicted that inflationary pressures and the depreciation of local currencies would continue to have an impact on business performance.
