Forex shortages stall Afdis upgrade programme

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WINE and spirits maker African Distillers Ltd (Afdis) says an acute shortage of foreign currency in the country has delayed its planned plant and equipment upgrade, businessdigest has learnt.

By Melody Chikono

Last year, the company indicated plans to embark on a plant and equipment upgrade to enhance production as the firm maintains double digit growth in volumes

The firm has also been looking at ways of cushioning itself in the face of an uncertain business environment characterised by a foreign currency shortage which has also contributed to product supply gaps, although current performance is satisfactory.

In the year to June 30 2017, all three product categories registered double digit growth with wines leading the pack at 29%, spirits continue to be the major revenue contributor at 66%, ready-to-drink (ciders and spirit coolers) contributed 24%, registering a 22 % volume growth.

Afdis MD Cecil Gombera told businessdigest in emailed responses that while Afdis had a clear plan for upgrades, it still had existing current capacity to utilise in the meantime.

“While we have a clear plan for upgrades in place, we still have existing current capacity to utilise.Thus, as we wait for the foreign currency situation to improve and enable such investment, we are working at optimising usage of current capacity,” he said.

Gombera said while Afdis saw growth potential in all its product lines, particularly ciders and spirits,the company would explore various pack formats to what it currently have.

“While we have a clear plan for upgrades in place, we still have existing current capacity to utilise. Thus, as we wait for the foreign currency situation to improve and enable such investment, we are working at optimising usage of current capacity,” he said.

He added that Afdis also had plans to roll out more capex investments, but foreign currency constraints continued to hamper its efforts.

The last investment it had was the US$5 million cider plant commissioned in 2014 at its Mt Hampden factory. The investment was expected to increase the company’s annual production capacity by 59%.

“We have plans and we will roll these out as soon as the foreign currency required is available. We are, however, not inhibited by the short-term inability to spend on Capex as we have adequate capacity to enable immediate to medium term growth.Our last major capex investment was the cider plant which was installed in 2014,” he said.

The support the firm is getting from its shareholders had enabled it to stay afloat.

“We import a number of our materials including bottles. While we are constrained by the forex challenges, we have the support of our major shareholders hence we have maintained strong market presence,” he said

However, in the midst of these woes,Gombera expressed optimism that Afdis will have another good year and deliver better value to the shareholder in 2018.