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Enacy Mapakame
Retail and specialty distribution group, Axia Corporation Limited’s volumes for the first quarter to September 30, 2019, went down across segments on subdued demand as disposable incomes wane.

The operating environment particularly in Zimbabwe remained challenging during the period under review mainly due to foreign currency shortages and inflationary pressures, which affected consumer spending.

Chairman Luke Ngwerume said this resulted in the group constantly adjusting prices, which had a knock on effect on demand and volumes.

At TV Sales and Home, volumes went down 50 percent against same period in the prior year. Despite the foreign currency shortages, product supply remained constant.

The segment has, however, began to witness volumes recovery post September on the back of new extended credit sale offering as well as opening of its new branch at Sawanga Mall in the resort town of Victoria Falls as the group expands its footprint.

Volumes at DGA Zimbabwe backtracked 31 percent year on year reflective of the declining consumer disposable income. Limited foreign currency shortages also had an effect on the business and the group is looking at import substitution to cushion self in the absence of forex.

“Also the shortage of foreign currency resulted in business reducing its imported stock component due to the concomitant pricing pressures.

“The business is looking at increasing volumes of locally produced products as best substitutes for some imported products as a way to recover lost volumes,” said Mr Ngwerume.

Product supply remained consistent at Transerv but cost pressures mounted due to limited foreign currency as most of the stock is imported. This resulted in a 60 percent decline in volumes.

On the upside, DGA Region’s Malawi business registered a 45 percent increase in volumes buoyed by acquisition of new agencies such as Blue Band, ProGroup, Pepsi and Nestle.

However, despite the new acquisitions of new agencies like Nestle, Zambia volumes went down 16 percent due to stiff competition from wholesalers in certain brands. But margins improved on sales mix.

During the financial year 2019, the business was hampered by defaulting customers in Malawi while Zambia had a 3 percent decline in revenue, which resulted in the group’s regional operations, through DGA, recording a 2 percent decline in turnover.

Regional operations achieved lower Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin of 0,1 percent from 2,8 percent on the back of stock write-offs from overstocking and customer returns which led to DGA Zambia making an operating loss.

The challenges Axia is facing are not unique to the retail and specialty distribution group alone but many other consumer oriented stocks witnessing significant volume declines. Delta recently updated the market revealing a subdued volume performance due to the obtaining economic challenges.

Power shortages, subdued productivity and implementation of austerity measures have also had a knock on effect on businesses across sectors as well as on consumption patterns, a trend that started late last year.

For consumer oriented stocks, product diversity may be key in attracting the market, especially when it comes to discretional goods.

Analysts are, however, of the view that while economic headwinds are expected to persist in the near future, Axia is expected to cash in on its partnership with Legend Lounge – a lounge suit manufacturing business, in which it owns 70 percent.

The partnership with Legend Lounge, will also see the group focus on growing a market for its manufactured products both locally and regionally.