Reason Razao
HARARE – Starafrica Corporation Limited saw a 65% increase in sales volumes in the nine months to December 21, 2020 mainly due to production returning to normal after the company had a three-week total shutdown in the previous quarter owing to the Covid-19 pandemic
In a trading report for the third quarter, the company said the sales volumes grew despite a 9.4% decrease in production, which it attributed to critical power and water outages as well as the effects of the Covid-19 pandemic.
The group’s country choice foods made significant traction in product development and market growth as sales increased by 24% compared to the same period last year.
Production and sales of new products have started to increase significantly, according to the trading report, with products such as peanut butter, honey and pre-mixes well underway in their development and market testing phases.
Considering that that the company operated in an economic environment characterised by increasing hyperinflationary pressures, intermittent power outages and pervasive liquidity challenges which significantly affected the group’s production operations, the developments are expected to enhance the company’s market footprint locally and in the region as well as increasing capacity utilisation and spreading its risk across multiple product lines
According to the report, despite the easing of lockdown restrictions in the operating market, consumer spending remained significantly constrained due to low disposable incomes.
The stability of the local currency that resulted from the introduction of the Foreign Currency Auction Trading System has also been sustained during the quarter, which increased confidence in the market and reduced speculative pricing tendencies during the first half of the quarter. However, the festive season recorded increases in the month-on-month Consumer Price Index (CPI) which had been falling in previous months and the period also witnessed an increase in the parallel market rates.
The group’s Secretary Aldo Musemburi said the company re-negotiated the amounts due on some of its legacy debts, managing to settle significant portions of amounts outstanding to the creditors and this is expected to improve the gearing position and allow the company to refocus funds on critical plant maintenance and upgrade and to ultimately increase capacity utilisation.
“The inflationary pressures have put significant pressures on the company from suppliers and customers alike. The rising costs of production mainly as a result of increases in plant maintenance costs have not been transferrable to customers as pressures rose on the company to reduce prices in the face of threats of imported sugar,” said Musemburi.
“In order to stay competitive and in the spirit of mutual beneficiation, the company effected a 15% decrease in manufacturer and bottler-grade sugar prices in December 2020 for its customers and, in turn, also negotiated some decreases in supplier costs with some of its main suppliers.”
According to Musemburi, the company’s property business continued to contract due to inability by tenants’ ability to meet their lease obligations due to the effects of Covid-19 on the economy.
Musemburi expressed optimism that the government’s envisaged vaccination program will yield positive results for the return to normalcy in the trading environment.
“The Board remains confident that the ensuing quarter will witness enhanced stability in the market which will boost capacity utilisation of the company as demand for the company’s products is expected to remain strong locally and in the region,” he said.
On the Zimbabwe Stock Exchange, Star Africa is sitting on PE of 74.48x with a year to date gain of of 89.59% and market cap of US$28.95 million.
