Agro-industrial concern, Ariston is concerned about the impact of rising exchange rates on margins at a time the value of the local currency continues to accelerate downwards against the major currencies.
The group liquidates a portion of its export earnings into local currency at a very noncompetitive inter-bank rate in line with government policy.
In its interim financial results, the group said the wide mismatch between the inter-bank market rate and parallel market rate used by suppliers has led to a 57 percent increase in costs.
“The widening of the exchange rate gap between the interbank auction rate at which the Group’s export revenue was retained and the parallel exchange rate that suppliers are charging for locally purchased goods continued to put substantial pressure on costs due to mismatch in the two rates. This resulted in a 57% increase in cost of sales. Gross profit margin declined to 34% compared to 63% in the prior comparative period,” the group said.
At close of yesterday’s auction the difference between the official rate of $ 338.5 against the USD and the $600-parallel market rate was 77.26 percent.
Loss from operations was 22 percent of revenue compared to a profit from operations at 19 percent of revenue in the prior comparative period.
As a result, the Group realized an inflation adjusted profit before interest and tax of ZWL94 million, compared to ZWL204 million in the prior comparative period.
This was after taking into account fair value adjustments, exchange differences, share of profit from investments in joint ventures and the monetary loss.
Inflation adjusted interest expense declined by 1 percent to ZWL21.5 million in the current reporting period. Overally, the Group doubled its profit after tax of ZWL103 million, which is a 111 percent improvement on prior comparative period’s ZWL49 million.
Tea production volumes had a marginal increase of 0.2 percent at 2,028 tonnes compared to 2,023 tonnes in the prior comparative period.
“Export tea sales volumes suffered a 22% decline to 511 tonnes, while average selling price improved by 8% against prior period. There was a slow uptake of export teas in the first quarter of the year due to the effects of the COVID-19 pandemic on shipping logistics and costs. However, demand started improving in early March 2022.”
Macadamia nuts production was volumes were 4 percent above the prior comparative period. Export sales volumes were 47 percent ahead of the prior comparative period due to sale of some prior year macadamia stocks at the start of the current year.
Other products such as potatoes, soya beans, seed maize, commercial maize, seed sugar beans, avocado, bananas and poultry contributed 27 percent of revenue compared to 17 percent in prior period showing that this category continues to grow and contribute positively to the Group’s profitability.
The Group’s activities are cyclical in nature with the majority of harvesting and selling operations occurring in the second half of the year.
