•  AH-Vest Limited's revenue increased by 2.3% in HY2023.
•  Loadshedding and increased costs impacted the company's profit.
• The company has contracts with related parties and exports to foreign markets.

AH-Vest Limited, a leading manufacturer of food sauces and condiments in South Africa, has released its financial results for the six months ended on 31 December 2022. Despite facing challenges in meeting customer demands due to loadshedding and increased manufacturing costs, the company reported a slight increase in net revenue from R110.7 million in HY2022 to R113.3 million in HY2023, a 2.3% increase.

AH-Vest Limited supplies its branded and private label products to retail chains, independent traders, and the catering industry. Some of its well-established brands include All Joy and Veri Peri, which enjoy strong brand recognition. The company has a presence in both domestic and foreign markets, and it exports its products to several countries.

Gross profit margins decreased marginally from 37.7% in HY2022 to 36.6% in HY2023, which can be attributed to an increase in manufacturing costs. The company also reported a 15.8% increase in operating expenses from R33.6 million to R38.9 million driven mainly by increased shipping and distribution costs. Finance costs increased by 28.8% from R2.1 million to R2.6 million, mainly due to increased interest rates during the period.

As a result of these factors, profit before taxation decreased by 67.1% from R8.5 million to R2.8 million, and profit after taxation decreased by 67.2% from R6.1 million to R2 million. The company's balance sheet review showed an increase in trade and other receivables by 42.9% from R42 million to R60 million, primarily due to increased sales in the second quarter of FY2023 compared to the fourth quarter of FY2022.

The trade and other payables increased by 26.3% from R52.9 million to R66.8 million, mainly due to increased purchases ahead of the festive season. Provisions increased by 50% from R0.6 million to R0.9 million at HY2023, mainly due to the provision for growth incentives to customers during the period under review. The growth incentive provision runs on a calendar year basis.

AH-Vest Limited did not experience a direct impact from COVID-19 during the period under review. However, the company faced an indirect impact from disruptions in the global supply chain due to China's lockdown of its factories in response to an upsurge in COVID-19 cases. Shipping costs remained high but have started to decrease.

Loadshedding had a significant impact on the company's operations during the period under review, resulting in increased downtime and loss of man-hours. To mitigate this, the company has invested in backup generation capacity, which will become operational in the fourth quarter of this financial year. However, if loadshedding continues on its current trajectory, an increase in operating costs due to diesel fuel and maintenance costs for the backup power supply can be expected.

The company has several existing contracts with related parties through its holding company, Eastern Trading Company (Pty) Limited, which is deemed to be a related party to AH-Vest. These contracts were considered to be in the ordinary course of business and have been in place for a number of years. When related party contracts are entered into, or at the time of variation of a contract, the terms thereof are assessed by the disinterested directors and, where relevant, comparable quotes are obtained. The terms of the pre-existing related party contracts are either market related or better than market related, which is of benefit to AH-Vest and its stakeholders.

According to Aaron Chiraerae, a Business Analyst, AH-Vest Limited, like many other companies in South Africa, is likely to face challenges in the coming financial year due to a range of factors. Loadshedding is expected to continue to be a major challenge, with the potential to disrupt operations and increase costs due to the need for backup power. Inflation is also a concern, as rising prices could impact the company's profitability if it is unable to pass on cost increases to customers at the same rate as inflation.

In addition to these challenges, AH-Vest Limited will need to navigate the ongoing impact of the COVID-19 pandemic, which has caused disruptions to global supply chains and consumer demand. The company may also face pressure to adapt to changing consumer preferences, as more people seek out healthier and more sustainable food options. However, these challenges also present opportunities for AH-Vest Limited to innovate and differentiate itself in the market.

Chiraerae added that to succeed in the coming financial year, AH-Vest Limited will need to remain agile and responsive to changing market conditions. This may involve investing in new technology and infrastructure to mitigate the impact of loadshedding, as well as developing new products that meet changing consumer demands. The company may also need to explore new markets and partnerships to diversify its revenue streams and mitigate the impact of geopolitical tensions. Ultimately, AH-Vest Limited's success will depend on its ability to effectively manage these challenges and capitalize on emerging opportunities in the South African region and global markets.

In conclusion, AH-Vest Limited has reported a slight increase in revenue despite facing challenges from loadshedding and increased manufacturing costs. The company has taken steps to mitigate the impact of loadshedding by investing in backup generation capacity. AH-Vest Limited has a presence in both domestic and foreign markets, and it exports its products to several countries.

-Equity Axis News