HomeBusiness DigestAxia Corporation revenue expected to surge 408%

Axia Corporation revenue expected to surge 408%

AXIA Corporation’s group revenue is seen surging 407,7% to ZW$2,83 billion in FY20, although inflationary pressures, liquidity constraints and volatile foreign exchange rates are seen continuing to plague the business’ operating environment.

Melody Chikono

The combination of a challenging macro-economic environment and indications of a poor agriculture season, according to IH securities, show that consumers are likely to remain under pressure and will continue to migrate to value offerings, which will negatively impact retailers of consumer discretionary goods.

In the half year 2020 (HY20), the operating environment remained challenging, characterised by the re-emergence of hyperinflation, shortages of foreign currency, depreciation of the local currency and persistent liquidity constraints.

While consumer’s disposable incomes remained strained, this resulted in the groups’ main operating business units recording a slump in volumes, which include TV Sales & Home (-30%), Distribution Group Africa (DGA)–Zimbabwe (-39%), Transerv (-46%), while DGA-Region posted a fairly decent set of results.
Through DGA, the group disposed of its 66,7% shareholding in Baobab Africa Limited, realising a profit of ZW$2,32million.

“Furthermore, we anticipate increasing money supply to spur further currency depreciation, which will be reflected through larger foreign exchange gains in FY20 results. Management remain optimistic and have indicated that their key focus will be on managing foreign creditor positions, securing additional inventory, as well as managing gearing levels.

“TV Sales & Home recorded a 385% increase in turnover for HY20, while operating profit for the segment also improved, indicating that the drive to increase credit sales paid off, resulting in positive growth in a shrinking market,” IH said.

IH, which made a buy recommendation for the company, also anticipated a 523 % growth in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to ZW $452,77 million, yielding an EBITDA margin of 16,0% in FY20.

Resultantly, a net income attributable to shareholders is expected to rise 322,3% y/y to ZW$254,40 million, attributed to exchange gains on translated foreign operations.

During HY20, the company’s focus on local products continues to yield positive benefits as production costs remain lower than regional competitors although foreign currency shortages continue to weigh down production for companies with import requirements.

Through Restapedic and Legend Lounge Wear, management are gearing for the export market, which will potentially minimise the company’s forex burden.

DGA-Zimbabwe’s volumes collapsed by 39% owing to foreign currency constraints, which resulted in a reduction in the business’ imported stock component.

“Adapting to the challenging operating environment, DGA-Zimbabwe is considering increasing volumes of locally produced products as substitutes for some imported products as a way of recovering lost volumes. DGA-Region’s turnover improved by 16%, in US dollar terms, on account of the acquisition of Nestle and Blue Band distribution agencies in Zambia, and the addition of Pro Group agency in Malawi,” IH said.

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