OK half-year revenue in 60pc jump
OK Zimbabwe’s revenue for the half-year period ended September 30, 2023, jumped by 60,38 percent to $727,9 billion in inflation-adjusted terms from $453,8 billion in the same period in 2022.
The group revenue also grew by 473,46 percent to 541,3 billion in historical terms.
However, operating costs in historical terms shot up by 886,83 percent mainly driven by backup power expenses, maintenance expenses, and labour costs.
Board chairman, Mr Herbert Nkala said that post the reporting period, the group initiated the process of renegotiating foreign currency-based leases and liquidating its foreign currency-denominated liabilities to reduce the impact of exchange rate losses. He said suffered loss of volumes to the informal sector due to the mandatory use of the official exchange rate by the formal sector compared to the informal sector, which enjoys high flexibility in determining exchange rate and trading currency.
“The reporting period opened with the official Reserve Bank of Zimbabwe Auction Rate at $929,86 and closed at a rate of $5 466,74. This rapid depreciation of the local currency caused some sharp price increases which in turn resulted in consumers suffering depressed affordability.
“The continued mandatory use of the official exchange rate with a capped margin of 10 percent for formal retail caused significant loss of volumes to the informal sector which enjoyed more exchange rate flexibility.
“Consequently, the group experienced weakening consumer demand during the first half, operating at volumes that were below expectation, resulting in a volume decline of 22,6 percent compared to the same period last year.
“Suppliers resorted to shortened trading terms as they sought to hedge against exchange rate movement-induced losses, which resulted in high incidence of stock-outs,” said Mr Nkala.
“Revenue for the half year grew by 60,38 percent to $727,9 billion from $453,8 billion in the comparative period. In historical cost terms, revenue grew by 473,46 percent to $541,3 billion from 94,4 billion.
“As a consequence of the exchange rate deterioration the cost of doing business continued to increase to unsustainable levels. In Historical terms, operating costs increased by 886,83 percent mainly driven by utilities and backup power expenses, transport and delivery, maintenance expenses, and labour costs.
During the period under review, the group incurred significant exchange losses on its foreign-denominated liabilities and leases amounting to $32,4 billion which negatively impacted profitability.
The giant retailer reported a profit after tax of $21,2 billion compared to 13,9 billion in 2022 whilst in historical cost terms, the net loss was $9,2 billion versus 2,2 billion in 2022.
“Post the reporting period, the group began the process of liquidating foreign currency-denominated liabilities and renegotiating foreign currency-based leases to reduce the impact of exchange rate losses going forward.
“The group utilised credit facilities to fund its strategic growth initiatives by its medium to short term growth plans and this resulted in the net finance charges increasing by 63,86 percent,” said Mr Nkala.
He also said the bulk of its $16,8 billion capital expenditure for the half year, was channelled towards developing the new Bon Marché Marondera store as well as new Alowell Pharmacy outlets.
“Capital expenditure for the half year grew to $16,8 billion from 7,4 billion last year. Most of the capital expenditure was channelled towards the new Bon Marché Marondera store and several new Alowell Pharmacy outlets that are now fully operational instore at selected branches,” he said.
OK also welcomed the Monetary Policy Committee’s recommendation to remove the 10 percent margin cap on the instore exchange rate and the removal of the Intermediated Money Transfer tax (IMT) on card transactions.-herald
