Depressed demand dents CFI volumes

Agriculture concern, CFI Holdings Limited’s retail division- Farm and City Centre (FCC), says volumes for the year to September 30, 2022 went down 21 percent on depressed demand, impacting the whole group’s overall performance.

FCC is the group’s cash cow.

During the period under review, the economy witnessed the resurgence of hyper-inflationary pressures on the back of sharp currency depreciation and the widening gap of up to 90 percent between the official and alternative markets exchange rates.

Additionally, factors stemming from the global impact of the Ukraine crisis and local growing economic uncertainties in the second half of the year saw average month-on-month inflation increase to 18,1 percent against 3,3 percent for the comparable period and 6,1 percent in the first half of the year.

Unfavourable weather patterns during the 2021/22 farming season had a knock on effect on the group’s performance as it caused a slowdown in demand for inputs.

“The erratic rains received during the 2021/2022 agricultural season suppressed aggregate demand for agro-inputs,” said group chairperson Itai Pasi in an update for the group’s performance for the year.

The division however managed to open the Builders City branch and refurbished the Sanyati and Chitungwiza branches to increase the trading space and bring convenience to customers.

Overall, the group’s revenue the year increased by 39,4 percent to $49,3 billion from $35,39 billion in the previous year driven by improved sales volumes from Victoria Foods underpinned by continued recapitalization.

Of the revenue, retail operations contributed 80 percent, a decline from 91,9 percent in the prior year, while milling operations -Victoria Foods- contributed 17,4 percent and farming operations accounted for 2,6 percent.

The group incurred unrealized exchange losses of $6,1 billion on its foreign currency denominated loans. As a result, the group widened loss before tax to $2,59 billion against a loss of $0,75 billion for prior year.

The group incurred a $0,77 billion inflation-adjusted operational loss (inclusive of monetary gains) before depreciation, impairment and financing costs compared to an operational profit of $0,4 billion in prior year.

Figures from the group show $548,19 million was invested in capital expenditure for the different Strategic Business Units (SBUs) mainly covering IT infrastructure for various FCC and Agrifoods, poultry and irrigation infrastructure at Glenara Estates.

At Genara Estates, maize and soya beans output was 13 percent down from the previous season as a result of reduced planting following late onset of rains. The potato harvest increased by 10 percent whilst yields improved by 7 percent compared to prior year.

Apart from investing in irrigation infrastructure in order to boost horticultural production, the Estate also maintained cattle pen fattening and breeding operations.

Stockfeed sales at Agrifoods registered a flat performance against prior year.

“Inconsistent raw material supplies limited the potential growth over prior year despite an otherwise vibrant market demand throughout the period.

“In addition, distortions on USD prices in part, contributed to constrained sales volume growth especially in H2,” said Pasi.

Despite the challenges, Agrifoods continues to put efforts to reassert its presence in the market as demand for its products continues to firm.

Under its property division, legal proceedings remain pending over Langford Estates before the relevant tribunals.

Despite the challenges experienced in the past financial year, CFI is upbeat of better prospects driven by the anticipated economic growth.

“Notwithstanding the challenging economic conditions which prevailed during the period, the group remains optimistic on the overall medium-term trajectory of the economy, as we anticipate continued growth driven largely by the mining, construction, agricultural sectors and increasing diaspora remittances.

“The Group will continue to invest in its milling operations in order to underpin its long-term competitiveness,” said Pasi.-ebusinessweekly