• Loss after tax widened by 961%
  • Macadamia production declined by 14%
  • Operating and production costs continued rising since 2019
  • Loss was hugely attributed to failure to access Chinese markets and RBZ’s 40% export retention thresholds

Harare- ZSE- listed diversified Group, Ariston Holdings Limited has capped the full-year ended 30 September 2022 in loss after encountering setbacks from within the Group based on cost containing measures and headwinds from both national and international level. 

The Group, which focuses more on macadamia and tea production and then diversified to potatoes, commercial maize, soya-beans, bananas and poultry posted a loss after tax of ZWL797 million from a loss of ZWL75 million in 2021, a loss increase of 961% which is an alarming figure.

The Group’s cost-containing strategies continued struggling since 2019 as witnessed by the continued increase in production costs and operating expenses from 9% to over 70%. The results show that the Group has struggled to implement cost-containing measures in a turmoil economic environment coupled with currency depreciation, inflationary pressures, power shortages and global economic shocks.

The graph below shows the Group’s production costs and expenses over four years

Costs of production between 2022 and 2021 increased by 9% with operating expenses hitting a 9% decrease as well while between 2021 and 2020, production costs shoot by 30% with operating costs soaring by 72%. The Group lastly recorded a solid profit after tax in 2019 when both production costs and operating expenses were effectively contained.

One of the cost-cutting strategies implemented by the Group was shifting from human labour to mechanisation. In 2021, the Group said in the long run, it plans to mechanise its whole processes to deal with labour and productivity issues. Improvements made through automation of certain production tasks released labour for harvesting resulting in improved production volumes, particularly for tea. 

However, the Group’s huge losses skewed towards the loss of Chinese markets for macadamia nuts, loss of more revenue to Reserve Bank of Zimbabwe’s 40% retention thresholds and reduced macadamia production during the year under review. 

From the local front, the Group attributed the waned performance to poor aggressive monetary policies that have seen companies losing more of their revenues through the export retention thresholds while at national level, loss of Chinese markets reduced macadamia nuts profit.

Hence, revenue flopped by 12% to ZWL4.1 billion from ZWL4.7 billion in 2021. The Group said in real terms, the revenue line was adversely affected by the reduction in the average selling price of macadamia and lower macadamia nut yield in the current year.

Commenting on the loss after tax incurred during the reporting period, the Group’s chairperson, Alexander Jongwe said, “A current year loss from operations was posted arising from the impact of the mismatch arising from revenue from exports where Reserve Bank of Zimbabwe (RBZ) retention continued to be paid at a rate significantly lower than the rate being charged by local suppliers resulting in real erosion of value.”

In 2021, the RBZ increased the tax retention thresholds from 30% to 40% starving companies of sufficient foreign currency needed to fund and grow operations. RIOZIM, one of the leading gold mining companies once reported a loss of circa 55% in total revenues. However, in his 2023 national budget speech, Finance and Economic Development Minister, Professor Mthuli Ncube said the retention thresholds will be revised by the end of 2023’s first quarter. 

Profit was further affected by the low production of macadamia and market extinction in China for the macadamia nuts due to the COVID-19 pandemic which forced China to close its markets. That flooded the nuts in the market resulting in low prices.

Macadamia production volumes declined by 14% from 1292 tons to 1106 tons despite an improvement in product quality

“Unfortunately, due to the effects described above on the macadamia market size and demand, the average selling price declined by 21% when compared to the prior comparative average price.”

“As a result of COVID-19 lockdowns, the Chinese market remained largely unavailable to the rest of the world resulting in an oversupply for the nut cracking market with a decline in average selling prices,” said Jongwe. 

However, despite the average export tea selling price declining by 1%, tea production volume continued on an upward trajectory with a 15% increase to 3158 tons from 2748 tons in the prior comparative period while export sales were up by 10%, a slight recovery in the tea market after the declines suffered with the onset of COVID-19 pandemic disruption.

Current year average selling prices for local tea sales improved by 12% in USD terms whilst volumes declined by 16% when compared to the prior comparative period.

The “Other Products” category comprising potatoes, commercial maize, soya beans, seed maize and bananas contributed 10% to the Group’s turnover, down from 11% contribution in the prior comparative period while revenue from poultry grew by 58% as a result of an increase in the number of placements.

“The diversification of the Group’s product offering has never been more important than in the current year. Aggressive growth in the crop offering of basic commodities grown from Kent Estate helped the Group immensely in the current financial year,” Jongwe said. 

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