Agro-focused companies project a tougher 2024
Agro-focused companies listed on the Zimbabwe Stock Exchange (ZSE) are facing a tougher 2024 as a result of a dry season.
Businesses are already witnessing reduced demand.
Weather experts projected that the 2023–2024 agricultural season would receive lower than normal rainfall induced by the El Niño phenomenon, which is set to reduce agricultural output in the region.
Elevated costs of production have also seen companies adopt cost containment measures while at the
same time diversifying their business focus.
CFI Holdings, in its trading update for the quarter to December 31, 2023, said it is exploring new strategic raw material procurement strategies to sustain operations while also diversifying retail lines away from dependence on agro-inputs.
The company is an agro-based industrial holding company with an interest in manufacturing animal feeds, maize and flour milling and snack foods.
“Overall, the group anticipates the FY2024 economic outturn to remain challenging and ongoing cost containment measures will continue to be implemented,” Panganai Hare, the company’s secretary said.
IH Securities, in a review of Seed Co Limited, said the ongoing El Niño phenomenon will play into depressed sales for the year in the Southern African markets that are forecast to experience below-normal rains this summer.
Zimbabwe is among the countries more severely affected, where drought impacts have led to water shortages and declining yields.
Tanganda Tea Company said the late onset of the rains adversely impacted bulk tea production, resulting in a 19 percent decline in volumes to 1 986 tonnes in the quarter to December 31, 2023, compared to 2 443 tonnes produced in the prior year.
In terms of financial performance, company revenue for the quarter under review of US$5 million was 9 percent below US$5 million achieved in the prior year.
Tanganda said the operating environment is expected to remain volatile and complex due to continued inflationary pressures, currency instability the escalation of costs and reduced consumer disposable incomes.
Agricultural concern, Ariston Holdings Limited, swung into a loss position of $33 billion for the year to September 30, 2023, from a profit of $5,9 billion in the previous year.
The company said that while the 2023–2024 agricultural season is expected to have lower than normal rainfall, Ariston has put in place measures to cushion its operations against bad weather.
“The group will have to rely heavily on its irrigation systems in mitigation. Dryland activities will be kept to a minimum. It is hoped that the extremely hot conditions will not persist for the duration of the entire season,” it said.
Morgan & Co, in their 2024 outlook, said that with the local currency already facing huge challenges in 2024, it is forecasting a bleak year.
However, Tanganda said that despite the decline in production, bulk tea export volumes grew by 18 percent to 1 274 tonnes from 1,076 tonnes achieved in the previous year, owing to improved logistical arrangements for more export shipments to be processed before the Christmas break.
The trading update revealed that packed tea sales volumes of 475 metric tonnes were 14 percent below the 549 metric tonnes achieved in the prior year.
The company said sustainable market diversification will continue to be pursued to expand the regional market.
It was noted that avocado and macadamia plantations that are under precision irrigation are looking healthy and the harvest of these crops will commence towards the end of the second quarter of the financial year.
Ariston said despite challenges in the market, the company in 2023 reported a 15 percent increase in revenue, totalling $35,479 billion compared to the prior year, with the growth driven by a rise in tea prices.
The company said joint ventures played a pivotal role in contributing positively to the group, with a 169 percent increase in the share of profits for the year.-ebusinessweekly
