Axia volumes jump as demand grows
Axia Corporation says improved business activity during the six months to December 2021 spurred demand for its products, which drove volume growth across the group’s units except for the distribution businesses in Zimbabwe and Zambia.
Mr Luke Ngwerume, the group’s chairman said the trading environment for the period was characterized by increased levels of inflation, unstable exchange rates and uncertainty, but the easing of Covid-19 lockdown restrictions saw business activity improving across the region before the onset of the fourth wave in December 2021.
“In Zimbabwe, the consumer disposable income benefited from increased economic activity driven by infrastructure spending, improved mining activity and better agriculture output,” he said.
He added that the increased use of foreign currency in the local market enables businesses to generate foreign currency which will help the group to undertake critical capital investments.
However, Mr Ngwerume said the widening of the gap between the official auction and parallel market exchange rates present pricing and value-preservation challenges to the businesses.
He said the result of this growing level of arbitrage and market distortions have negative effects on the entire economy.
He indicated that the indexed cost base and high interest rates had a significant negative impact on the group’s financial results and management will continue to adapt business units’ operating models to manage business growth and sustainability.
During the period under review, improved demand resulted in volumes above those reported in the comparative period. As a result, Group revenue grew 70 percent to $15.2 billion compared to $8,9 billion the prior comparative period.
“The revenue growth filtered into gross margin which increased by 93 percent in the prior period,” Mr Ngwerume said.
The group’s operating expenditure increased by 105 percent to $ on comparative period dueto certain indexed cost base. The group posted an operating profit of $3,2 billion, representing an 84 percent increase on the comparative period.
Mr Ngwerume said the Group’s balance sheet remained solid and Net borrowings decreased by $1,19 billion as a result of improved cash sales which improved cash and cash equivalents balances resulting in decreased gearing.
During the period under review, Axia generated cash of $2,4 billion from operations which was up 577 percent from the comparative period and this translated into enhanced free cash generation enabling the group to easily incur capital expenditure for the period totaling $217,3 million.
Mr Ngwerume said the group’s free cash generation will enable it to execute its exciting expansion opportunities.
In terms of operations review, TV Sales & Home remained focused on driving revenue by taking full advantage of the significantly eased lockdown restrictions since September 2021.
Mr Ngwerume said the business was able to capitalise on the resumption of normal working hours and improved supply chains after Covid-19 restrictions were eased.
This resulted in revenue growth of 115 percent on the prior year was recorded in the first half of the financial year whilst volume performance increased by 10 percent over prior year.
“Second quarter volume performance was up 4 percent better compared to the same period in prior year attributable to successful market activation promotions namely Black Friday and Ho-Ho-Home which were well received by consumers.
“The debtors’ book grew by 102 percent in value and collections on the book have remained solid,” he said.
Mr Ngwerume said as part of investing in production facilities to boost bed production at Restapedic, TV Sales & Home increased its shareholding in Restapedic from 49 percent to 60 percent effective 1 July 2021 with an amount of US$860 000 paid for this extra investment.
He said the increase in shareholding enabled Restapedic to invest in a 10 000 bed production facility which is under construction in Sunway City, Harare and is estimated to cost US$4,5 million and completion of building the factory is estimated to be November 2022.
During the period under review, Restapedic bedding attained revenue and volume growth of 33 percent and 5 percent respectively compared to prior period.
Distribution Group Africa, in Zimbabwe saw turnover growth by 46 percent against the same period last year.
However, volumes declined by 22 percent from the same period last year, mainly as a result of discontinuation of ProGroup wholesale business without significant financial impact.S0 “The business continues to safeguard and grow shareholder value by embarking on projects that generate positive cash flows and achieve the required returns,” said Ngwerume.
On Distribution Group Africa Region, Mr Ngwerume said the new government in Zambia brought about much needed stability to the Zambian currency making planning more predictable while Malawi continues to face shortages of foreign currency.
“However, the addition of two key distribution agencies in the first quarter of the financial year resulted in improved profitability for Malawi.
“The combined USD revenue for the regional businesses grew by 53 percent owing mostly to the new agencies taken on in Malawi.
In Zambia, the strengthening kwacha encouraged the business to take advantage of Forward Exchange Contracts thus enabling pricing at reasonable rates and this enabled the Zambian entity to grow revenues by 21 percent and improve profitability by over 100 percent,” he said.
During the six months period, Transerv remained profitable despite major challenges in obtaining foreign currency to always ensure adequate stocking levels. Mr Ngwerume said turnover for the first half increased by 81 percent over the comparative period which was underpinned by volume growth of 13 percent.
He said in January 2022 a new branch was opened in Chiredzi while branches in Victoria Falls, Avondale fitment centre (formerly Autocycle) and a fitment centre at the Chikwanha retail shop are all at advanced stages of opening in the next few months.-The Herald
