17 June 2019

Zimbabwe: Ariston Optimistic Despite Cyclone Damages

Listed agricultural concern, Ariston Holdings Limited is upbeat of maintaining a growth trajectory in the second half of the current financial year despite an anticipated increase expenses due to cost of repairs for tropical Cyclone Idai damages.

In March this year, the country was hit by the tropical cyclone which mostly affected Chimanimani and Chipinge areas that are home to some of Ariston's businesses.

According to the group, the damage on the estates varied substantially, with the greatest effects being experienced at Roscommon Estate in Chimanimani where damage was incurred on infrastructure, including roads, bridges, irrigation equipment, housing and to a lesser extent, orchards.

Chief executive Paul Spear said the firm was therefore working on rebuilding the damaged infrastructure at an estimated cost of US$1,5 million.

Despite the challenge, the group anticipates earnings growth, maintaining the growth trajectory seen in the half year to March 31, 2019.

"The positive trends shown in the first half of the year are expected to continue into the second half of the year.

"Due to the cyclical nature of our agricultural model, the majority of our harvesting and selling activities occur in the second half of the year.

"Export prices for macadamia and tea are expected to remain stable at current levels. The introduction of the interbank market rate will ensure that the Group's export revenues are reflected at market related fair value when reported in RTGS$," said Spear.

In the half year under review, revenue increased by 50 percent to RTGS$7,96 million from $5,31 million realised during the comparative period driven by better pricing being achieved on export crops due to quality improvement and also the effect of the interbank rate where the RTGS$ has depreciated against the US dollar.

Operating expenses grew by 249 percent against prior year, reflecting the effect of the depreciation of the RTGS$ against the US$.

"The majority of the group's suppliers were quoting prices in RTGS$ at an implied rate higher than the official interbank rate, which contributed to the growth in operating expenses," said Spear.

Ariston recorded an operating loss before fair value adjustments of $2,9 million, down from an operating profit of $0,63 million in prior year.

Fair value adjustment for the half year rose to $7,21 million compared to $0,50 million for the prior comparative period largely driven by the effects of the underlying interbank exchange rate on the fair value of growing and mature crops destined for the export market which had not been harvested at half year.

After tax profit amounted to $0,79 million compared to $0,028 million for the prior comparative period.

At the close of the half year, 19 percent of macadamia crop had been harvested and sold and full year volumes are expected to be in line with prior year.

Tea production for the six-month period improved by 6 percent to 1 954 tonnes from 1 851 tonnes achieved in the prior comparative period with full year production volume is also expected to be in line with prior year.

Harvesting and selling of stone and pome fruit had been completed as at half year. Production volumes rose 37 percent to 1 207 tonnes compared to 881 tonnes for prior year.

Ariston did not declare a dividend.

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