AFRICAN Distillers Limited (Afdis) volumes shot up by 11 percent during the half year ended September 30, 2024 driven by ready-to-drink and wine segments which grew by 22 percent and 13 percent respectively.
Afdis chairman Matlhogonolo Valela said in a statement accompanying the company’s financials that the ready-to-drink volume was influenced by promotions and the successful launch of a new product, NightSky Gin & Tonic which was well received by the market.
Matlhogonolo Valela
Valela noted that the wine category benefited from improved availability of affordable wines and intensified focus on direct sales distribution.
“The widespread distribution of cheaper and illicit spirits curtailed growth of the category,” he added.
Spirits, the company’s flagship category contributing over 55 percent of total revenue, has recently struggled to grow market share due to stiff competition from smuggled brands being sold cheaper on the market.
Revenue from the spirits segment fell 2,8 percent to US$14,388 million from US$14,701 million in the same period previous year.
During the half year, Afdis revenue improved by seven percent to US$26,2 million due to increased volume. Operating income, at US$1,5 million, was however lower than prior year partly due to thinner margins from price reductions meant to counter competition from illegal imports.
“In addition, the differences in approach used in deriving prior year US$ numbers together with distortions in exchange rates and inflation indices during the same prior period makes comparison difficult,” Valela said.
Concerning tax matters, the issue between the company and the Zimbabwe Revenue Authority (Zimra) is being contested at the courts and could have a material impact on the company’s operations, if it materialises.
“As previously reported, there were areas of disagreement with Zimra regarding the applicable currency of income tax payments for the period 2019 to 2022,” Valela said.
“Zimra issued an additional income tax assessment, including penalties and interest against the company amounting to US$1,8 million for obligations that had been settled in local currency.
“Zimra contends that the tax should have been paid exclusively in foreign currency,” he said.
Going forward, Afdis expects the current limited access to foreign currency, and erratic power supply to continue presenting challenges for the business.
The company is, however, hopeful that the measures recently implemented by authorities to stabilise the local currency will create a more conducive trading environment.
“Management will continue to focus on exploring opportunities for market share growth, revenue and profitability anchored on product innovation and enhancement, production efficiencies and overhead containment,” Valela said.
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