Depressed macadamia prices dampen Ariston prospects
ARISTON says high production costs and depressed macadamia prices are likely to dent the company’s profitability in the 2023 financial year.
This comes as the agriculture focused firm experienced a 43 percent increase in group finance costs compared to prior year.
Cost of production increased in the year grew by 9,5 percent to close at $2, 3 billion from $2, 1 billion in the prior year while operating expenses also rose by same margin to $2, 3 billion.
Generally, the 2022 financial year was uptight, attributable to a number of disruptions worldwide chiefly due to the Eastern Europe conflict, a position that did not give worldwide countries a chance to reincarnate from the setbacks induced by Covid-19 pandemic.
The Russian-Ukraine conflict had ripple effects on the world economy as it stoked the cost of agricultural inputs such as fertilisers and chemicals all leading to heightened inflation in almost every country worldwide.
It also disrupted trade logistics between economies including container shortages for shipping entities all of which occasioned spiraling costs of goods mainly raw materials.
Also, the Covid-19 pandemic saw a drop in the macadamia market size (a key crop for Ariston), but tea market remained lucrative in terms of both demand and prices and as stated by Ariston, “the net return would be adversely affected by the same increase in agricultural input costs.”
Consequently, the group posted a loss before interest and tax of $999 million compared to a loss of $927 million in the prior comparative period.
“A current year loss from operations was posted arising from the impact of the mismatch arising from revenue from exports where Reserve Bank of Zimbabwe (RBZ) retention continued to be paid at a rate significantly lower than the rate being charged by local suppliers resulting in real erosion of value,” said the firm.
This was compounded by the 2021/2 agricultural season which comprised inconsistent rains and warmer temperatures particularly in the first quarter of the financial year to December 2021.
Chairman of Ariston Holdings, Alexander Jongwe, indicated that performance in 2023 was likely to remain bleak given the exorbitant cost structure with regards to the cost of operations and diminished global market prices for produce, particularly macadamia.
“In the short term, production input costs are expected to remain high. At the same time, average selling prices for macadamia will remain depressed whilst tea prices and volume offtake will continue to improve. It is expected that improvements in the macadamia market will only be truly felt in a positive way in the 2024 year,” said Jongwe in the statement of the financials for the year to end of September 2022.
Ariston’s tea production volumes recorded a 15 percent growth in the year to 3,158 tonnes from 2,748 tonnes in the prior year while export sales volumes improved by 10 percent, a slight recovery from the dip during the peak of the Covid-19 pandemic.
Tea prices on the international market, however, weakened by one percentage point.
On the contrary, macadamia production volumes waned by 14 percent to 1,106 tonnes compared to the prior year where it recorded 1,292 tonnes albeit good quality.
In the period under review, the Chinese market remained closed resulting in a 21 percent dip in average selling prices compared to the prior comparative average price.
The other segment of products comprising potatoes, commercial maize, soya beans, seed maize, and bananas’ contribution to turnover declined by 11 percent compared to the previous year.
Resultantly revenue for the year to September 2022 declined by 12 percent to $4, 1 billion credited mainly to the decline of macadamia selling price and finance costs which increased by 43 percent in inflation-adjusted terms.-ebusinessweekly
