Axia pushes growth through diversified distribution channels

Specialty retail and distribution group, Axia Corporation Limited (Axia), is countering El Nino’s dampening effect on consumer spending by strategically expanding its distribution channels to drive volume growth, a strategy expected to bear fruit according to analysts’ projections.

While the weather phenomenon is expected to impact economies across Axia’s operating regions, the Victoria Falls Stock Exchange listed group, is already taking proactive steps to bolster its sales volumes across markets.

A key focus for Axia is expanding its distribution network in Zimbabwe. This includes catering to both established formal markets and the dynamic informal sector. This two-pronged approach is expected to ensure the group reaches a wider customer base and mitigates reliance on any single channel.

Additionally, recent government measures are stimulating renewed demand from the formal sector, further boosting Axia’s reach.

“Discretionary spending is expected to decline, impacting on the group’s sales volumes,” said IH Securities.

“Axia, however, is implementing strategies to increase volumes in the distribution business in Zimbabwe by serving both the formal and informal market channels.

“Moreover, post the reporting period, there has been improved demand from the formal sector following the measures implemented by the fiscal authorities,” said the research firm.

Axia’s DGA business underwent a restructuring, creating three streamlined entities designed for increased efficiency. This leaner structure allows DGA to better serve its clients and adapt to market shifts.

At Transerv, the business is expected to maintain a growth trajectory into the foreseeable future as it will leverage credit sales.

Axia is also investing in infrastructure to support volume increases. The new Restapedic factory in Sunway City nears completion, boasting a production capacity of 10,000 beds per month and featuring an automated conveyor system.

This investment not only increases production but also improves efficiency. Restapedic is further bolstering its regional presence by pursuing export opportunities in Zambia through a collaboration with DGA Zambia.

Cost-saving measures, including sourcing higher quality and lower-cost raw materials, are also underway to improve profit margins.

Meanwhile, in terms of performance, Axia’s first half of FY24 (1H24) results demonstrated the resilience. While overall revenue dipped slightly due to a challenging economic environment, Axia’s focus on cost control and pricing strategies led to improved margins.

Liquidity constraints, currency depreciation, and subdued demand impacted some sectors, particularly the distribution segment. Foreign currency limitations in Malawi and exchange rate fluctuations in Zambia presented additional hurdles.

Despite these challenges, Axia achieved volume growth in several key segments, including TV Sales & Home (TVSH), Restapedic Manufacturing, Legend Lounge, and Transerv.

TVSH expanded its physical footprint with new stores and explored new product lines, leading to a 11 percent volume increase. Restapedic and Legend Lounge witnessed impressive surges of 58 percent and 34 percent in volumes, respectively.

TVSH emerged as the leading revenue contributor, followed by DGA Zimbabwe. Notably, EBITDA rose due to improved cost efficiencies and margin recovery with TVSH as the major earnings contributor, with DGA Zimbabwe making a significant contribution.

Axia closed the period with a healthy net profit and strong cash reserves. However, total borrowings remain a consideration.

Looking ahead, Axia acknowledges the risk posed by currency depreciation. However, the company’s commitment to diversified distribution channels, operational efficiency, and cost-saving measures positions it for a solid FY24.-ebusinessweekly