Ariston Holdings interim revenue down 8% but eye recovery during the second half

Ariston Holdings interim revenue down 8% but eye recovery during the second half

HARARE – Ariston Holdings revenue for the half year ended 31 March 2017 was down 8.17% at $3.47mln y-o-y. The decline was mainly attributed to the late commencement of the macadamia harvesting.

The company however anticipates reversing the decline in the second half of the year. Group chief executive Paul Spear in a statement accompanying the results said due to the cyclical nature of the company’s agricultural model, the second half of the year represents the harvesting and selling season for the majority of the crops.

“So far indications are that the Group will have higher yields than prior year and pricing remains firm and the group has adequate export orders for the current season’s production,” he said.

The interim results also show that the group narrowed its loss from $2.1 mln to $1.9 mln. The Group’s Southdown Estates contributed 71% to company revenue compared to 75% in prior comparable period.  Claremont Estates contributed 20% to the Group’s revenue compared to 16% in 2016 while Kent Estates contribution at 9% remains unchanged from the prior comparative period.

Loss from operations for the period was at $1.4mln compared to $1.12mln while finance costs reduced to $0.71mln from $2.05mln as a result of the conversion of shareholder loans to equity in August 2016.

In terms of volume and operations, at Stone fruit, harvesting has been completed for the season and volumes improved to 943 tonnes from 776 tonnes achieved during the prior year. Average pricing was 13% below the comparative period as a result of disappointing export volumes.

Pome fruit harvesting is in progress and so far the volume is ahead of prior period with 709 tonnes already harvested compared to 543 tonnes in 2016. “Prices have been firm. The increase in yields for both stone fruit and pome fruit is the result of young orchards coming into production and quality has been good,” he said.

Passion fruit orchards continue to produce fruit at acceptable levels and pricing has however been 3% weaker than that of prior year. Avocado harvesting will commence in the third quarter.  With export forecasts positive, the crop is expected to be in line with expectations.

Annual crops for instance potato plantings were limited by the incessant rains, nonetheless production is up on the prior year. At Kent Estate commercial maize, seed maize and beans await harvesting in the third quarter.

Poultry continued to perform very well and utilisation of the second poultry site will commence after half year.

Tea production for the period was 1,392 tonnes, representing 18% increase on prior year. Spear said year-end production is expected to be comfortably ahead of prior year and the average tea export pricing improved 11% during the period. Sales of blended teas have been slightly ahead of prior year in terms of volumes produced and sold with improved margins being realized.

Spear said although late, the macadamia harvest for 2017 is set to surpass prior levels and the quality of the nuts harvested so far are has been the best. Average prices have also increased.

Our Thoughts 

The collapse of industry in Zimbabwe has provided a boon for South African companies, who have been making inroads into the country and snapping up ailing companies. In 2012 AFRIFRESH Group of South Africa increased its shareholding in Ariston to 61% after snapping up 21% of shares not taken by shareholders of the group after a rights issue. The company paid $0,009 per share and the shares were issued on the basis of two ordinary shares for every one such share already held in the company.  Effectively they acquired the company for a song and now they are set to reap high profits from their acquisition.  We believe that is the company is well poised to take advantage of opportunities in foreign markets.

Although the local avocado market faces stiff competition from local vendors as they offer the single-seeded berry at very low prices. The group has better prospects in the international markets which have seen a massive growth in avocado prices this year. Surging demand and decreased output form key producers in California, Peru and Mexico due to the drought in California and workers striking in Mexico, has resulted in the price for a 10kg box go up to £21.78 (double that of prior year). This trend is expected to hold for some time and Ariston should take advantage of this window of opportunity by increasing exports.

Kenya is one of the key tea producers in Africa, and output is expected to fall due to the low rainfall in Q1, this again presents an opportunity for Ariston to tap into regional markets given that their Blended Tea Factory has a fair share of 25% of the local tea market. In the last year, global tea prices have gone up by about 23% representing an almost five-year high.

The regional macadamia nut industry foresees increased production in the coming harvest period which could threaten Ariston’s current positive outlook.


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