Despite recording 48% revenue growth over the prior year, Zimbabwe’s largest tea producer, Tanganda Tea Company Limited has cited high inflation and currency volatility as major setbacks to the operating environment in Zimbabwe.
In a trading update statement dated February 10, the company, through its secretary Nyasha Kodzanai, claimed that Zimbabwe’s economy was affected by skyrocketing inflation, the Covid-19 pandemic, the effect of rising global inflation and power outages.
“The operating environment was characterised by currency volatility, erratic power supplies, reduced agricultural output, the adverse impact of the pass-through effect of rising global inflation and continued geo-political and COVID-related supply disruptions,” read the statement seen by Nehanda Radio.
“This coupled with high inflation (243.8% as at December 2022) resulted in a continuation of subdued economic performance. Resultantly, the Country’s economic growth was downgraded from earlier projections of 5.5% to 4.6% in 2022.
“The volatile exchange rate also saw a 10% depreciation of the local currency to 684.33 against the United States Dollar which put further pressure on costs.”
Tanganda however said positive trends included rainfall for the quarter at levels of an average 49% above prior year.
The company said power outages also affected its business.
“The Company continues to strengthen its climate resilience through reservoir construction and building efficient irrigation systems for improved productivity.
“In addition to this, business interruption caused by ongoing power outages has been significantly reduced by the solar plants at three of our five estates,” Kodzanai said.
On financial performance the company said its revenue for the quarter grew by 48% over the prior year comparative period in inflation adjusted terms.
It added that “performance remained satisfactory in spite of inflation induced increase in operating costs.
“Despite the late onset of the rainy season, bulk tea production volumes were in line with the comparable prior year period. Bulk tea export volumes however, were 33% below prior year as 52% of the total volume was produced in the month of December and would be exported in subsequent months.
“Packed tea sales volumes grew by 13% for the quarter with export volumes into the region growing by 37% over prior year.
“In the quarter under review, 325 tonnes of macadamia nuts were exported as nut in shell,” read the statement.
The company further anticipates the operating environment to be difficult due to “envisaged macro-economic instability due to inflationary pressures”.
“The operating environment is expected to remain difficult on the backdrop of the envisaged macro-economic instability due to inflationary pressures, currency instability, fast rising operational costs and external exogenous shocks such as imported global inflation.
“The Company is focused on exploring value addition options and cost management to mitigate against reduced profit margins and is optimistic about its prospects during the financial year as all crops are looking good and there is a firm demand for its products,” the company said.
