OK Zim FY profit down 21 pct on falling consumer demand

OK Zim FY profit down 21 pct on falling consumer demand

HARARE , June 5 (The Source) – Zimbabwe largest retailer, OK has recorded a 21 percent decline in profit after tax to $9,7 million for the full year to March 31 compared to $12 million last year due to limited demand attributed to deflation and shrinking disposable incomes.

Zimbabwe’s annual inflation for April rose by 0.65 percentage points but remained in the negative at -0.26 percent from -0.91 percent in March.

“The impact is significant as we go forward because effectively we operated for nine months of the year when our numbers in terms of inflation was negative,” chief executive Willard Zireva told analysts during a briefing on Thursday.

He said deflation had ramifications on revenue as prices were decreasing although the company recorded a slight revenue increase of  0.9 percent to $483 million.

Zireva said suppliers had reduced prices to in response to falling demand and the retail sector also followed suit.

“For the last nine months we followed the same and reduced prices,” he said.

Earnings before interest, taxes, depreciation and amortisation was down 12 percent to $19,8 million.

Capital expenditure stood at $12,4 million with the company budgeting to spend  $16 million this year on capex.

The company’s overheads were up 6.3 percent to $14,3 million, higher than sales growth due to advertising costs.

Stocks were lasting an average 39 days against a standard of 30 days.

OK opened four new outlets and shut down one during the year bringing the total to 59. The company has also set up a new subsidiary, iTech to fill a gap but says would not depart from the supermarket retail business.

Going forward, Zireva said subdued business activity was expected to continue well into the next financial year.

He said the market would continue to be competitive with the entrance of Botswana’s retailer Choppies which took over 10 outlets in Bulawayo and traditional competitors, TM and P n Pay.

“On the operational side we will focus on market share growth and efficient use of existing capacity,” he said.

The company has since taken over the running of its in-store bakeries from Innscor and is planning to increase such outlets from 12 to 25 to improve the bottom line by October this year.

Zireva said the company was also negotiating for five new sites while plans for regional expansion were on course with  negotiations for two unnamed sites underway.