By ETimes
HARARE – Tanganda Tea Company has increased efforts to generate income through regional expansion after witnessing a drop in topline for the first quarter ended 31 December 2023.
Tweaking of business models continues to be the order of the day as firms try to survive in this challenging operating environment.
Rising inflationary pressures, currency volatility and policy inconsistencies defined the operational environment, according to the tea maker.
“The exchange rate increased by 792% year-on-year, putting further pressure on ZWL operating costs,” the company said.
“Export proceeds continue to be subject to 25% mandatory liquidation at subeconomic exchange rates. This implied significant tax on the topline reduces exporters’ competitiveness and their ability to reinvest export proceeds into value addition and growth in exports.”
Zimbabwe’s agriculture industry is under pressure from the El Nino climate phenomenon. The tea maker stressed that rain-fed agricultural productivity was impacted by the high temperatures and delayed start of the rainy season.
“The late onset of the rains has adversely impacted bulk tea production resulting in a 19% decline in volumes to 1 986 tonnes compared to 2 443 tonnes produced in the prior year.
“Despite the decline in production, bulk tea export volumes grew by 18% to 1 274 tonnes from 1 076 tonnes achieved in previous year owing to improved logistical arrangements for more export shipments to be processed before the Christmas break,” the company said.
Sales volumes of packaged tea, at 475 tonnes, were 14% lower than the 549 tonnes attained in the comparative period.
“Notwithstanding that the customer order book is full, a combination of packaging supply constraints, power outages and managing customers to reduce defaulting customers’ risk are among factors that resulted in a reduction in sales volumes.
“Subsequently, volumes have started to increase as constraining factors have eased and the cumulative variance has begun to narrow,” the company said.
Tanganda seeks to grow its exports and generate more foreign exchange required for key imported raw materials and equipment.
“Packed tea exports into the region grew by 100% in response to the company pursuing and supplying an opportunity that arose to penetrate the Democratic Republic of Congo.
“Sustainable market diversification will continue to be pursued to expand the regional market,” the company said.
Government policy towards export retention will also be a concern as a significant portion of the company’s business is local and it relies on imported materials for its processing and packaging operations.
The company has undergone some structural changes. with operations have diversified away from coffee and tea products towards horticultural products such as macadamia and avocados.
“Avocado and macadamia plantations which are under precision irrigation are looking healthy and the harvest of these crops will commence towards the end of the second quarter of the financial year,” reads the trading update.
As for the financials, the company’s revenue declined 9% to US$5 million from US$5.5 million in the prior year.
In its outlook, the company said, “The operating environment is expected to remain volatile and complex due to continued inflationary pressures, currency instability, escalation of costs and reduced consumer disposable incomes.”
Tanganda closed its Thursday session at $2,174.00 per share on the Zimbabwe Stock Exchange (ZSE), recording a 0.1% drop from its previous closing price of $2,175.57.
The counter has a market capitalisation of $568 billion, which is about 1.39% of the ZSE.