Export Sector On Decline

THE performance of export companies reflect broadly the overall condition of the economy.

 

It is widely assumed that the export sector is on a sure course to continue declining despite the signing to the Southern African Development Community Free Trade Area last month.

The only debate this view holds is that it is simply a question of “by what margins not if”.

More so when an export company predicts a bleak future with regards to its operations.

“The business and operating environment is expected to be more difficult necessitating the continued deployment of strategies to stem volume declines and cope with hyperinflation,” said Interfresh during the announcement of its financial results for the interim period ending June 30.

Interfresh is a industrial horticultural concern whose nature of business includes processing and marketing horticulture produce and food products for both the local and export sector.

A loss of $14 quadrillion was made in inflation adjusted terms.

Zesa power cuts which adversely affected citrus irrigation during the critical fruit phase in September last year account for 48% decline in citrus production and in citrus exports. Juice concentrate and bottled crush volumes were limited due to erratic supplies of inputs.

In real terms, working capital and borrowings were lower than last year, accounting for a 36% decline in net financing costs.

The $35 quadrillion monetary loss is a reflection of the difficulty experienced in preserving value during the hyperinflationary environment.

“Lower borrowing during the period, a net cash position at the end of the period, very slow utilisation of the foreign currency accounts balances and practical ability to convert profits into hard assets during the period resulted in the significant monetary loss,” the company said.

A fair value adjustment of $24 quadrillion of $24 quadrillion was recorded from revaluation of biological assets in compliance with IAS41.

“Operating margins improved from 34% at year-end (December 2007) to 46% during the current interim period primarily because of the introduction of the inter-bank rate in May 2008,” the company said.

In inflation adjusted terms, the company’s turnover fell by 56% due to across the board volume declines, price controls on some local products and the effect of below fair value exchange rate on export revenues.

The new bottling operations achieved good margins, profitability and cash flow. The flower bush replacement programme has been accelerated in order to restore yields to acceptable levels. Product supply problems, the growth of informal market and pricing challenges continue to depress formal fresh produce market resulting trading volumes declining by 45%.

By Paul Nyakazeya