- Faced high competition from unregistered informal market players, leading to shrinking profit margins
- Drought conditions dampened demand for agricultural products
- Other business units encountered lower yields, supply shortages, and power outages
Harare- CFI Holdings has faced significant challenges in its operations, citing high competition from unregistered informal market players and the impact of drought conditions in the six months to 31 March 2024.
The company reported a turnaround from a loss position of ZWL297 billion to a profit of ZWL254.97 billion in the first half of 2024.
However, the company's retail performance was negatively impacted by drought spells, which dampened the appetite for agricultural products.
The unregistered informal operators, who do not comply with the government's official exchange rate, have been selling their products at an inflated parallel market rate.
This has made CFI's products more expensive in local currency and cheaper in US dollars. As a result, over 60% of domestic transactions are now conducted in US dollars, causing customers to avoid CFI's products due to their higher prices.
Consequently, the retail unit's profit margins have shrunk, despite a marginal 2% increase in sales volumes. The retail unit contributed 80.42% of the company's overall performance, up from 76.3% previously.
The company attributed the retail unit's challenges to "a combination of falling consumer demand for agricultural inputs in the face of the El Nino-induced drought, rapid inflation, and overall suppressed consumer spending power." Additionally, the company cited "stiffening competition, mainly from the unregistered informal players, resulting in shrinking margins."
In response, the company said that management is "implementing strategic pricing and marketing initiatives to adapt to the ever-changing trading environment."
Other business units also faced challenges. Glenera Estates' potato yield was 5% lower than the previous year, despite an increase in hectarage.
Agrifoods' sales volumes increased by 8%, while Victoria Foods' flour sales volumes remained flat due to wheat shortages and power outages affecting production.
However, maize volumes sales improved by 55% due to successful marketing efforts.
The company warned that the maize milling business is set to be impacted by maize shortages following the regional El-Nino induced drought, resulting in increased grain prices.
These higher prices may not be fully passed on to customers due to a highly competitive market and depressed consumer spending power.
Poultry operations, including Crest Breeders and Suncrest Chickens, remained under care and maintenance during the period.
However, the company is still pursuing joint ventures leveraging its poultry infrastructure and brands, and processes are underway to resuscitate poultry operations on the Group's Beatrice farm, Hubbard Zimbabwe.
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