STIFF competition from lowly priced white spirits and lingering effects of excise duty have put African Distillers Ltd (Afdis)’s margins under pressure, the company says.
In a statement attached to its full year financial results, Afdis says despite strong competition, local production had increased putting a stop to spirit imports.
“The decline in sales volumes was mainly due to the lingering impact of “ad valorem” .The change in this duty form “ad valorem” to “specific” in August 2010 dramatically improved the competitiveness of locally produced products and thus of the company.
“Local production is increasing as the importation of spirits products is no longer attractive. Pressure on disposable income has created a situation in which lower priced products in the white spirit market have shown the strongest growth. Competition in this sector is intense and margins remain under pressure,” the company said.
But the company says sales recovered in the second quarter with sales on an upward monthly.
Afdis says it is upgrading its distribution network countrywide and hopes this will enhance sales opportunities. Sales volumes to Decemeber 31 2010 were 7% lower from the prior year but grew 3% in the second quarter, Afids said.
The company hopes to breakeven in the full year to December after posting a loss.
“A breakeven situation is forecast for the full year, and the Board is confident that the company is on a sustainable recovery path,” the company said.
A trading profit of US$491 000 was offset by retrenchment costs and exchange losses.
The group made a gross profit of US$2,5 million.
Gross sales stood at US$10,2 million from US$8,6 million in the prior year.
Excise duty payments amounted to US$2,3 million.
The company also announced the appointment of a new managing director.
The company is 30% controlled by Delta Corporation Ltd, Zimbabwe’s largest producer and distributor of alcoholic and non-alcoholic beverages.