- The project to address power challenges and reduce production costs
- Tea production volume declines by 21% during the reported period
- Uncertain outlook due to challenges in the out-grower model and shipping delays for macadamia exports
Harare- Ariston Holdings, a prominent agricultural Group, has successfully concluded a solar project commissioned in July to mitigate the impact of power challenges on production costs and output. The decision to invest in the project was driven by the need to address ongoing power challenges that had led to increased production costs. The Group allocated resources to install a 500Kva Solar energy plant at Southdown Estate, which has now been completed.
The completed solar project is expected to provide Ariston Holdings with a range of benefits and opportunities. By harnessing the power of the sun, the Group can tap into a sustainable and renewable energy source, reducing its reliance on conventional power systems. This transition to solar energy is anticipated to enhance operational efficiency, optimise resource allocation, and potentially lower production costs.
In its trading update for the third quarter ended on 30 June 2023, Ariston Holdings reported that the full impact of this substantial investment would be realized in the financial year ending on September 30, 2024, rather than in the current year's performance. This indicates that the anticipated benefits of the solar project will be more prominently reflected in the company's future financial results.
Turning to production, which is a crucial aspect of Ariston Holdings' operations, tea experienced a decline of 21% during the period. Production volume decreased from 2,850 tonnes to 2,245 tonnes. However, despite this decrease, there was a notable improvement in export tea sales volumes. Export tea sales increased from 897 tonnes in the previous comparative period to 1,343 tonnes.
While the decrease in tea production volume is a significant factor to consider, the positive trend in export tea sales volumes indicates that the company has effectively capitalized on market opportunities. This suggests that the quality of the company's tea products remained favourable, and there was strong demand in the export market, notwithstanding the challenges faced in production.
“During the current year, the Group made the decision to drop 20% of the lowest yielding tea gardens where fertiliser application at the new increased price could not be justified. At the same time, harvesting was changed to ensure better quality of Greenleaf and finally, production equipment was also further enhanced to improve made-tea quality so as to increase export tea quantity,” said the Group justifying why tea production declined.
In contrast to tea production, macadamia production volumes demonstrated a notable increase in the current quarter. The production volume of macadamia reached 1,313 tonnes, which was 29% higher compared to the production volume of 1,020 tonnes in the previous comparative year. This positive growth in macadamia production highlights the company's success in this sector.
The macadamia harvest for the current year began in late March 2023, aligning with the maturity of the nuts. However, compared to the previous year, the harvesting season started later, consequently delaying the commencement of the selling season. As a result, the current export sales volumes of macadamia nuts stood at 513 tonnes, reflecting a 35% decrease compared to the 785 tonnes sold during the same period in the previous year.
Although export supply contracts have been secured with various customers for the majority of the macadamia nuts produced thus far, the Group said the movement of the nuts had been hindered by shipping delays. These delays which slowed down the transportation of the macadamia nuts, impacted the pace of sales.
On the other hand, poultry production volume experienced a reduction in the current year. This decrease was attributed to the ongoing review of the out-grower model. The out-grower model is being evaluated due to its unsustainable nature, primarily stemming from the mismatch between revenues denominated in Zimbabwean dollars (ZWL) and input costs incurred in US dollars (USD). Furthermore, the ZWL revenue received is insufficient to enable the out-grower to settle their input creditors, resulting in financial challenges.
Other products such as commercial maize, seed maize, commercial soya beans, seed soya beans, potatoes, and bananas registered a significant improvement. The Group said it achieved higher productivity and output in these sectors, which indicates positive agricultural outcomes.
The Group achieved a revenue of ZWL28,268 billion, representing an 18% increase compared to the previous figure of ZWL23,882 billion.
Looking ahead, the improvement in average selling prices for both local and export tea is anticipated to continue until the end of the financial year. Macadamia volumes are projected to surpass the levels of the previous comparative year. However, the average selling price for macadamia is expected to be 20% lower compared to the prior comparative year. On the other hand, revenue from the "other products" category is expected to exceed the figures from the previous comparative period.
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