Operating challenges weigh down on CFI division

AGRI-industrial firm CFI Holdings Limited says its Farm & City Centre (FCC) division struggled in the year ended September 30, 2023 under the weight of a difficult operating environment, characterised by unstable multiple exchange rates, high interest rates and reduced consumer spending.

The firm said as a result, overall sales volumes for the entity’s key volume drivers fell by 15 percent from the prior year.

“Following the announcement of the 2023/2024 drought caused by the El Nino phenomenon, sales of key agricultural volume drivers such as fertilisers and chemicals are forecast to remain depressed,” the group chairperson Ms Itai Pasi said in a statement accompanying its abridged report for the year ended September 30, 2023.

Ms Pasi noted that the operating environment is forecast to remain challenging and complex in the medium term aggravated by the now prevailing

El Nino-induced 2023/24 phenomenon which is set to reduce agricultural output in the region.

Given that the agricultural sector is a mainstay to the Group’s operation, proactive management practices will therefore be employed to ensure the Group’s survival in these difficult times, she said.

“Going forward, in the short to medium-term, the Group will prioritise continued investments in its milling operations in order to underpin its long-term competitiveness.”

Ms Pasi said for the year under review, the group’s inflation-adjusted revenue increased by 245,7 percent to $201,99 billion from $58,43 billion in the previous year, reflecting the mismatch between the rapid inflation of the Zimbabwe dollar during the year as compared to the subdued official inflation statistics.

Overall, retail operations contributed 76,3 percent, milling operations 20,1 percent while farming operations accounted for 3,4 percent of the group turnover.

“Expenses increased in real terms as a consequence of them being pegged by suppliers and service providers in USD but converted to local currency at prevailing parallel market exchange rates.

“On the other hand, selling prices were determined in line with official exchange rates, which consistently lagged behind market rates,” said Ms Pasi.
She added that the group incurred unrealised exchange losses of $139,5 billion on its foreign currency-denominated loans and creditors.

“Consequently, the group posted a loss before tax of $125,23 billion against a loss before tax of $3,06 billion from the prior year.”

“Given that the agricultural sector is a mainstay to the group’s operation, proactive management practices will therefore be employed to ensure the group’s survival in these difficult times,” she said.

Ms Pasi said CFI invested $2,29 billion into property, plant and equipment, mostly company motor vehicles and capitalised Victoria Foods plant spares as well as centre-pivot irrigation equipment at Glenara Estates.

Under the milling operations, Agrifoods sales volumes increased by 31 percent from the prior year on the back of improved raw material availability on the local market from a good 2022-2023 harvest.

Ms Pasi said Agrifoods continues to reassert its presence in the market and efforts to improve demand for its products are ongoing as the entity claws back to claim its market share.

At Victoria Foods, volumes declined by 14 percent, weighed down mainly by intermittent power cuts affecting production.

“Additionally, the maize mill was seriously affected by raw material supply challenges during the period and apart from the shortages, raw material prices also rose from the prior year’s level ultimately depressing the division’s financial performance,” added Ms Pasi. —chronicle