Ariston losses widen
Zimbabwe Stock Exchange listed agricultural concern, Ariston, saw its after tax losses widen to an inflation adjusted $33,1 billion in its financial year ended September 30, 2023.
The group attributed the performance to exchange losses of $57,1 billion despite also earning $44,7 billion in monetary gains.
During the said period, Ariston earned a gross loss of $9,4 billion and this was largely due to a change in reporting standards that resulted in fair value changes to biological assets being recognised under cost of sales.
Total revenue increased by 15 percent to $35,5 billion.
In USD terms total tea revenue increased by 29 percent from the previous year. Tea volumes declined by 34 percent to 2,427 tonnes due to 20 percent of the lowest yielding tea gardens being pruned down as the fertiliser costs made these gardens’ viability marginal.
However, improved quality led to improvements in the overall average selling price from US$1,075 per tonne to US$1,875 per tonne, which was a 68 percent increase.
Export tea sales volumes improved by 21 percent, with the average selling price improving by 6 percent. Local tea sales volumes declined by 6 percent whilst the average selling price improved by 38 percent largely due to dollarisation.
Macadamia production volumes increased 23 percent, but oversupply in the market resulted in a 40 percent decline in average selling price. The group’s other products (comprise potatoes, commercial maize, seed maize, soya beans and bananas) contributed 19 percent of total revenues, up from 10 percent in the previous year.
Analyst, Sean Nemangwe said; “It is a financial performance that reflects the risks associated with operations that are dominated by primary agricultural production. Low output in the tea operations and weak prices in the macadamia operations saw losses widen.”
Prevailing economic conditions also weighed as despite being a largely export oriented operation, the group faced exchange losses due to the compulsory export proceeds surrender policy.
The increase of the operating expenses to revenue ratio to 71 percent from 56 percent likely reflects the impact of the weak revenue growth against a high fixed costs base, as well as the dollarisation of local costs.
Nemangwe said; “This has in turn weighed on the group’s cash generation, leading to a fairly concerningly weak liquidity position. This is particularly concerning given the increasingly volatile weather conditions, particularly in key geographic areas for Ariston’s operations, as well as the implications of the low rainfall expectations.”
Given the high cost borrowing environment, the group appears to be facing significant downside risks.
Long-term trend analysis indicated that the average selling prices earned from both macadamia nuts and tea exports have been on downward trend. Since 2019, tea prices are down 13.1 percent and Macadamia prices are down 54.4 percent.
This underlines the need for Ariston to diversify its primary production and implement value addition processes. The challenge is that the group in its present state has limited internal capacity to make any significant capital projects.
“Even with a rebound in macadamia prices, the long-term outlook is still arguably subdued without a significant injection of capital,” he said.-ebusinessweekly
