El Niño to hit CFI sales volumes

CFI Holdings says it anticipates a tough operating environment in 2024 owing to the El Niño phenomenon that is projected to jeopardise the group’s agriculture segment in the 2023/24 summer cropping season.

In the statement of financials for the year to September 30 2023, CFI Holdings chairperson, Itai Pasi (pictured) said the group will be employing proactive management practices to ensure its survival in the looming tough times.

El Niño can have significant effects on agriculture, both positive and negative.

Studies show that the exact impact of El Niño on agriculture can vary depending on the specific location and the severity of the event.

Different regions may experience a combination of negative effects, whose impacts can also be influenced by local agricultural practices and infrastructure.

In the case of Zimbabwe, it is feared that El Nino might lead to a decrease in rainfall, causing drought conditions in some regions which can severely impact agriculture by reducing crop yields and causing water shortages for irrigation.

Compared to the traditional rain season, Zimbabwe started receiving substantial amounts of rain from mid-December.

As such both commercial and small-scale farmers are still engaged in planting activities.

El Niño effects are widespread as they also affect livestock and fisheries owing to drought conditions which can lead to the scarcity of grazing lands, reduced fodder availability, and water scarcity for livestock.

Drought also influences the prevalence of diseases and invasion of pests such as locusts and aphids, which can cause further crop damage. El Niño is known to reduce crop quality and yield as its characteristics which encompass drought, flooding, temperature fluctuations, and pest/disease outbreaks all contribute to reduced agricultural productivity.

“The operating environment is forecasted to remain challenging and complex in the medium term aggravated, by the now prevailing El Nino induced 2023/24 phenomenon which is set to reduce agricultural output in the region.

“Given that the agricultural sector is a mainstay to the Group’s operation, proactive management practices will therefore be employed to ensure the Group’s survival in these difficult times,” said Pasi.

She noted that Farm and City Centre (FCC) volumes uptake slumped after the announcement of a possible El Nino phenomenon-induced drought during the 2023/2024 season.

According to Pasi, this caused a decline in the sales of key agricultural volume drivers such as fertilisers and chemicals.

These are forecasted to remain depressed in the short term. Moreover, the retail division struggled under the weight of a difficult operating environment, characterised by unstable multiple exchange rates, high interest rates, and reduced consumer spending.

“As a result, overall sales volumes for the entity’s key volume drivers fell by 15 percent from the prior year.”

However, to underpin its long-term competitiveness the Agro-concern said it will continue to prioritise investments in its milling operations.

Operationally for the year under review, CFI Holdings inflation-adjusted revenues increased by 245,7 percent to $201,99 billion from $58,43 billion in the previous year, reflecting the mismatch between the rapid inflation of the Zimbabwe dollar during the year as compared to the subdued official inflation statistics.

Overall, retail operations contributed 76,3 percent, milling operations contributed 20,1 percent, and farming operations accounted for 3,4 percent of group turnover.

The group incurred unrealised exchange losses of $139,5 billion on its foreign currency-denominated loans and creditors.

Subsequently, the group posted a loss before tax of $125,23 billion against a loss before tax of $3,06 billion from the prior year.

In terms of capital expenditure, the group invested $2,29 billion into property, plant, and equipment, mostly in company motor vehicles and capitalised Victoria Foods plant spares, as well as centre-pivot irrigation equipment at Glenara Estates.

Given the Group’s reported losses and current debt position, the group’s board did not declare a dividend for the year ended September 30, 2023.-businessweekly