Covid-19 lockdowns cripple Padenga sales volumes

DIVERSIFIED crocodile skin and meat processor, Padenga Holdings Limited, says the Covid-19-induced lockdowns have resulted in a crippling drop in sales volumes.

While the company had sold 14 321 skins around the world in 2019, it indicated in its trading update for the quarter ended 30 September 2020, that sales volumes had dropped by 42 percent.

“In the Zimbabwe operation, skin sales volume were down 42 percent compared to prior period (8 286 versus 14 321 skins) as a result of the lockdowns,” said Padenga.

“By the end of the third quarter 22 796 crocodiles had been harvested and skins were awaiting sales grading to be convened when international travel resumed.”

The group said the quality and size of harvestable crops in the pens was consistent with expectations to achieve the budgeted harvest by the end of the year.

After the lifting of travel restrictions in October, a total of 18 629 skins were graded and invoiced.

“Of those 6 260 skins were shipped in October and the remainder are to be shipped in November,” it said.

Demand for crocodile meat in Europe remained subdued despite restaurants opening towards the end of the second quarter and at the end of third quarter, European exports stocks amounted to 68,1 tonnes.

“Initiatives are in place to develop the local market and absorb this product until the international export market returns,” said Padenga.

Financial performance in the period under review was enhanced by the consolidation of the Dallaglio mining business, which saw revenue rising up 221 percent with the mining business contributing 70 percent of that.

“Covid-19-related disruptions impacted the sales of crocodile and alligator skins with no meaningful turnover being recorded since April 2020.

“Notwithstanding this, revenue from skins sales was only five percent below the prior period. Total expenses for the period to September 2020 were eight percent below budget and 27 percent above prior year,” it said.

“Prior year figures did not include the Dallaglio mining business hence the distortion in the cost increase comparison against prior period.”

It said the Covid-19 pandemic continued to pose an ongoing threat to business continuity as it impacted traditional markets in those countries that Padenga trades the skins into.

However, it is hoped that with the easing of the lockdowns the two main retailers of high-end leather goods both reported improved sales volumes across all product categories on the third quarter in their trading updates.

“Covid-19-related lockdowns prevented the scheduled skins sales grading during the second quarter and third quarter from occurring.

“Tanneries in France and Italy have remained open in the quarter after Covid-19 shutdowns with emphasis on processing skins for their top-tier customers.

“Strong retail sales have since been recorded across Asia as those regions recovered following lockdowns,” said Padenga.

The company said the full impact of Covid-19 pandemic remains difficult to assess in the short-term and the business is responding to the needs of its primary customer in order to sustain sales volumes and margins.

The group said it continues to manage stock levels for its critical inputs such as feed, chemicals and other consumables, ensuring a stock cover of between three and six months depending on the perishability of the commodity.

“Although international supply chains have been volatile, sufficient orders have been placed to ensure business continuity through to mid-2021.

“The group is well positioned to meet the current challenges and generate sustainable long-term growth across all its business units, which should in turn drive enhanced shareholder returns.

“The current market is demanding defect-free skins and prices are holding for that quality of skin,” said the firm.

“Grading stringencies are anticipated to be tightened as the supply of skins currently exceeds demand.”

It is hoped that this will over time see fewer skins being sales graded as Grade 1s and the company has anticipated this and is revising its production strategies to produce skins of higher quality at reduced volumes.

“However, depressed demand for alligator skins generally will adversely impact volumes and prices for the next two to three years,” said Padenga.

It said production was being adjusted to produce exact sizes and numbers that customers still in the market require and cost containment is being practised to sustain liquidity.-chronicle.cl.zw