LOCAL companies are experiencing a decline in volumes as consumers become more price-sensitive, a set of financial results released recently has revealed.
Numerous firms reported that consumers are now cutting on spending as the country’
s galloping inflation continues to erode disposable incomes.
Zimbabwe’s inflation recently surged to 1 042%, further straining consumers.
Beverages manufacturer, Delta Corporation, said its volumes for the year ended March 31 slumped 15% due to consumer resistance to price increases.
Robbie Mupawose, Delta chairman, said the decline in consumers’ disposable incomes had resulted in reduced demand for the company’s products.
“Volumes for the year are 15% below those of the previous year reflecting relatively soft demand for beverages as a result of the tightening of disposable income,” Mupawose said.
“With rising inflation, real incomes will not keep pace,” he said.
Mupawose said the decline in the volumes also reflected sensitivity to pricing in sorghum beer as the cost of grains rose considerably faster than inflation and a most disappointing occurrence where the market went without carbonated soft drinks.
Despite having posted a pre-tax profit of $475,8 billion in the half-year ended March 31, Red Star Holdings (Red Star) is also feeling the pinch as it reported that consumers had become more price-sensitive.
The retail firm, which was recently listed on the Zimbabwe Stock Exchange, said this could be due to erosion of consumers’ disposable incomes by the country’s galloping inflation.
“Consumers have become more sensitive to price changes, probably due to declining real disposable incomes,” Patison Sithole, the chairman of Red Star, said in a statement accompanying the company’s results for the half year to March.
Sithole added that the situation had been worsened by suppliers who have reduced credit payment periods.
“On the other hand, suppliers reduced their credit with the group,” he said.
He added: “This demonstrates how the business environment had become challenging in the period under review.”
Sithole said industry capacity utilisation remained low at an estimated 40% due to fuel problems, erratic input supplies and working capital constraints.
Red Star is the holding company of Advance and Red Star Wholesalers.
Supermarket group, OK Zimbabwe, said operations were restrained throughout the trading period.
“Disposable incomes were eroded by hyperinflation,” OK chairman Eric Kahari said in the group’s results for the year ended March.
Kahari said business activity was generally subdued throughout the period under review.
OK registered an operating profit of $890,3 billion, an increase of 1 270% from $65 billion made in the previous year.
Newsprint and stationery manufacturer, Art Corporation, also reported lower volumes due to a decline in the demand in the same period.
The group’s sales volumes dropped significantly by an average 30% throughout the business units.
“The loss in local market sales volumes, particularly in the second quarter, was due to a decline in aggregate demand,” the board said in a notice signed by company secretary Franklin Mukarakate.
“Post March trading conditions in the local market have continued to deteriorate due to pressure on disposable incomes,” Mukarakate said.