ZSE-listed agro-industrial group, CFI Holdings has warned that local and global inflation headwinds and steep exchange rate disparities will persist in the short term and are expected to depress disposable income and spending to year-end.
The economic environment has been witnessing a resurgence of inflation driven by sharp currency depreciation on both the official and alternative markets exchange rates, buttressed by various interventions that gave rise to an increase in local currency price levels.
According to the Group, month-on-month inflation rose sharply from an average of 6.2% in the second quarter to 22.4% for the third quarter ended 30 June 2022, whilst year-on-year inflation rose to 191.6% at end of June 2022, from 72.7% as at 31 March 2022.
During the third quarter ended 30 June 2022, the ZW$ depreciated by 160.5% against the US$ on the willing buyer willing seller market, from ZW$142.42: US$1 on 31 March 2022 to ZW$370.96: US$1 as of 30 June 2022.
“This is expected to depress disposable income and spending to year-end, save for mining and construction sectors of the economy, where improvements are expected,” CFI said in a trading update.
Meanwhile, the Group’s sales volumes for the retail division's key revenue drivers during the quarter were behind the same period last year.
“The late onset of the 2021/22 rain season and the resultant lower harvest suppressed demand for agricultural inputs. Demand for fertilisers, which traditionally peak during the tobacco marketing season, was also constrained by the significant real price increases for the commodity,” CFI said.
The Group highlighted that cement sales for the quarter were also adversely affected by supply constraints.
However, Victoria Foods flour sales were up 135% relative to the comparable prior quarter following the Company's recapitalisation at the beginning of the year and improved raw materials availability during the period.
Glenara harvested 1,770 tonnes of maize as well as 729 tonnes of potatoes and 621 tonnes of soya beans, maintaining yields relative to the prior year.
CFI’s inflation-adjusted revenues grew by 21.8% to ZWL6.54 billion from ZWL5.34 billion in the prior year's quarter.
“Of the Group's inflation-adjusted turnover, Retail contributed 70.85% (2021– 87.37%) whilst Milling and Farming Operations accounted for 25.79% (2021–7.91%) and 3.36% (2021– 4.72%) respectively,” the Group said.
Going forward, the Group remains optimistic about consolidating its fortunes amidst the evolving challenges in the operating environment.
“The Group will maintain its focus on sustaining business continuity in the obtaining environment,” CFI said.
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