Zimpapers Logo

Enacy Mapakame

Business Reporter

Analysts have projected a volume uptick for Axia Corporation during the company’s financial year 2024, driven by a diversified product portfolio, new homeware appliances and expansion of distribution channels.

During the just-ended financial year to June 30, 2023, Axia spent US$6,6 million on capital expenditure, primarily relating to the opening of new stores and expansion of its retail footprint.

However, this represented a 49,55 percent decline from the US$12,43 capex for the financial year 2022.

Nevertheless, the group plans to continue exploiting expansion opportunities and has scheduled the opening of four new TV Sales and Home (TVSH) stores with a new store concept, Bedtime Store, opening two stores.

Market watchers see the group cashing in on the store expansion initiative that will push sales for the year.

Additionally, TVSH has been focused on introducing new product ranges, both locally produced and imported; the business managed to re-engage with Samsung Electronics during the period presenting a partnership with great potential for sales volumes.

“We anticipate an uptick in volumes in FY24 on the back of new homeware appliance and distribution business lines, in addition to the benefits of the group’s footprint expansion,” said stock brokers IH Securities.

While currency depreciation and inflation in the region remain causes for concern as they create downside risk from exchange losses, Axia has however begun to focus on exploiting opportunities in the local informal sector which does not require credit terms.

“This is expected to reduce the risk of exchange losses emanating from delays in payments from customers,” said IH Securities.

Meanwhile, Axia’s revenue for the full year to June 30, 2023, declined marginally by 0,24 percent to US$203,8 million compared to US$204 million recorded in the previous comparable year as volumes took a dip.

Intermittent raw material supply gaps owing to delays in auction payments weighed on TVSH production volumes, resulting in a 14 percent and 7 percent decline in the Restapedic and Legend Lounge units, respectively.

DGA volumes fell 29 percent year on year in Zimbabwe as demand in the formal sector weakened, whilst Zambia volumes increased 22 percent year on year on the back of an increase in high-margin products.

Additionally, increased fuel costs and human capital costs also continued to exert pressure on the business.

Despite the declines, the group realized growth in gross margin which increased by 2 percent on the prior year as management made efforts to contain operating expenditure although cost push pressures were evident in fuel costs and human capital costs resulting in increases over the comparative period.

According to the group’s performance update for the period under review, Axia posted an operating profit of US$20,84 million, representing a 16 percent decline to 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.

Net interest expenses amounted to US$3,22 million, with 48 percent of this incurred in the first quarter of the financial year following the sharp increase in interest rates on local currency-denominated borrowings.

Profit before tax came in at US$11,19 million, which was 32 percent below the prior year. Basic earnings per share and headline earnings per share both declined by 34 percent.

The group’s financial position remained solid. Borrowings grew by US$3,19 million.

According to the performance update, the group generated cash of US$15,105 million from operations which enabled it to incur capital expenditure for the year of US$6,6 million while its free cash generation enabled it to continue executing expansion opportunities.