Distribution Group Africa (DGA) Zimbabwe, a business unit of Axia Corporation, has stopped supplying some of its major customers in the formal sector over delays in payments, opting to exploit demand from informal traders.
DGA-Zimbabwe is a distribution and logistics concern, and its core areas of expertise lie in inbound clearing and bonded warehousing, ambient and chilled/frozen warehousing, logistics, marketing, sales, and merchandising services.
The Zimbabwean distribution group houses a number of leading brands such as Colgate, Kellogg’s, Johnson & Johnson, Tiger Brands, Unilever, Rhodes, Pioneer, Irvines, Probrands, and Pepsi.
Group chairman, Luke Ngwerume, commenting on the group’s financials for the year ended June 30, 2023, said DGA Zimbabwe volumes for the year under review were 29 percent below the prior year, resulting in a decline in revenue largely due to weaker demand in the formal sector.
“The business incurred losses during the year due to exchange losses arising from delays in payments from its major customers.
“This led to management’s decision to stop supplying to some customers as a way to manage the risk to debtors,” he said.
He added that management is continuously working with all parties to build demand in the formal sector, and the company is continuously working with all parties to build demand in the formal sector.
“The business remains poised to exploit growth opportunities from economic activities in the informal business sector that will not require extended credit terms,” said Mr Ngwerume.
However, this comes as the Government recently said it will move to address distortions in certain supply chains where manufacturers are directly delivering goods into the informal sector, threatening the viability of wholesalers.
Industry and Commerce Minister Dr Sithembiso Nyoni said if the Government did not address the situation, that would bring chaos within industry and commerce.
The central bank has also since proposed the removal of the 10 percent trading margin when charging for goods and services by formal businesses to help them survive competition from the informal sector.
However, Mr Ngwerume said the business continues to safeguard and grow shareholder value by embarking on projects that generate positive cash flows and achieve the required returns.
Axia’s revenue for the year under review at US$203,8 million was a marginal decline from US$204 million recorded in the prior year, largely as a result of foreign currency exchange losses.
Despite the revenue decline, the group realized growth in gross margin, which increased by 2 percent from the prior year.
According to the company’s financials, most of the group’s operating business units achieved increased volume and revenue growth during the year under review.
The main operating business units for the group are TV Sales & Home (TVSH), Distribution Group Africa (DGA), and Transerv.
Mr Ngwerume said management made efforts to contain operating expenditures, although cost pressures were evident in fuel costs and human capital costs, resulting in increases over the comparative period.
As a result, the group posted an operating profit of US$20,84 million, representing a 16 percent decline from the comparative period.
“The financial loss line is predominantly composed of foreign currency exchange losses resulting from the depreciation of monetary assets denominated in local currency as the local currency significantly devalued in the last quarter of the financial year,” he said.
During the year under review, fourth-quarter revenue for TV Sales & Home was up 7 percent compared to the same period the prior year, but year-to-date volume performance increased by 4 percent compared to the prior year.
Mr Ngwerume said revenue increased by 5 percent, primarily as a result of the generic growth of stores in the store network.
“Most operating costs incurred during the financial year were indexed to the US dollar, resulting in significant growth against the prior year,” he said.
He added that, as previously mentioned in the half-year, TV Sales & Home continues to invest in volume growth initiatives with the introduction of a new product range from the group’s local manufacturing units as well as imported products.
Mr Ngwerume said the business managed to reengage Samsung Electronics as a trade partner after a very prolonged absence, and the potential of this partnership is significant.
During the period under review, three new stores were opened in Harare; however, two stores were also closed in Harare as the business was given notice by the landlord.
“Plans are underway to continue expanding the retail store network. At least four new stores will be opened in the first half of the new financial year, with a new store concept, Bedtime Store, opening two stores.
“The first outdoor world garden furniture store was opened in September 2023,” the chairman said.
He said volumes are expected to improve in the new financial year, ceteris paribus, following the addition of new home appliances and homeware distribution business lines.
Restapedic, a bed manufacturing business unit of TV Sales & Home volumes for the fourth quarter, improved by 10 percent, resulting in quarterly turnover growth of 7 percent against the comparative quarter.
However, year-to-date volumes and turnover decreased by 14 percent and 9 percent, respectively, primarily as a result of poor performance in the first quarter and third quarter of the financial year.
Distribution Group Africa—Region, in Zambia, volumes increased by 22 percent on the prior year, resulting in 14 percent revenue growth.
Mr Ngwerume said the sales mix was skewed towards high-margin products, which led to improved margins.
“The business increased its operating profit by 199 percent on a like-for-like basis, in US$ terms, and the business continues to monitor and correct its pricing positions in response to market conditions,” he said.
For the year under review, Transerv revenue increased by 5 percent compared to the prior year, driven by rapid expansion in the company’s retail footprint. Mr Ngwerume said the company opened seven new retail stores in Harare and one in Kadoma, and the business continues with its drive to increase its retail footprint in a bid to bring convenience and improve the overall customer shopping experience.
Herald
