Axia’s suffers 23% distribution revenue decline, d...

Axia’s suffers 23% distribution revenue decline, does well with Transerv and TV Sales and Home

Audrey Galawu

Assistant Editor

Axia Corporation Limited's latest financial results revealed a 23% year-on-year revenue decline in its Zimbabwe distribution business, reflecting challenges in an evolving economic landscape.

This decline contributed to an overall 5% drop in group revenue to US$193.849 million.

Axia Chairman Luke Ngwerume highlighted how the group has navigated persistent economic pressures, stating, “Persistent foreign currency shortages and competition from informal markets required adaptive strategies to sustain growth and profitability.”

Zimbabwe’s foreign currency shortages and high inflation have led to ongoing pressures on businesses to adjust prices and manage costs. Although the recent introduction of the Zimbabwe Gold currency has shown potential to stabilise exchange rates, issues with ring-fenced unpaid auction funds have negatively impacted Axia’s working capital.

Ngwerume acknowledged these challenges: “While the Group supports the monetary authorities’ currency reforms, we are currently affected by unpaid auction funds that were ring-fenced, and this has negatively impacted our working capital.”

Inflationary pressures also led to a 5% increase in operating expenses, but the Group saw an improvement in gross margins, which rose by 2% year-on-year.

Axia posted an operating profit of US$19.645 million, a 6% decrease compared to the previous year, and a profit after tax of US$6.064 million, down 2% from the prior year.

Substantial once-off restructuring costs related to inventory and debtor write-offs in the distribution business also weighed on results, but the Group remains optimistic about future profitability.

The group faced varied conditions across its regional operations in Malawi and Zambia. In Malawi, although inflation remained relatively stable, foreign currency shortages and a 69% depreciation of the Malawian Kwacha impacted operations.

Axia mitigated some of these challenges by increasing locally sourced products through strategic partnerships.

Meanwhile, in Zambia, inflationary pressures and a 37% depreciation of the Zambian Kwacha against the US Dollar led to price adjustments that affected sales volumes. Nonetheless, the Zambian business managed to secure sufficient foreign currency to meet its operational requirements.

The company’s key segments, TV Sales & Home, Distribution Group Africa, and Transerv, experienced both growth and restructuring. TV Sales & Home recorded a 15% increase in sales volumes to 144,886 units, driven by top-quality product offerings and the opening of new Bedtime shops in Harare and Gweru. Restapedic, Axia’s bed manufacturing arm, saw a 54% rise in sales volumes, a result of increased market demand and improved production efficiencies.

DGA Zimbabwe, despite its revenue challenges, has restructured its operations, shifting some distribution functions into joint ventures aimed at relieving working capital constraints and driving profitability.

Transerv, which deals in automotive spares and solar products, reported an 11% growth in revenue and a 6% increase in volumes. New shop openings and the expansion of solar product offerings significantly contributed to this growth.

The group generated a net cash inflow of US$7.925 million from operations, up 10% year-on-year, allowing for investments in both working capital and strategic expansions. Notably, Axia increased its shareholding in Transerv from 50.51% to 87.75% for US$1.8 million and invested a total of US$3.2 million in capital expenditures.

Looking forward, the Group plans further investments in its TV Sales & Home and Transerv businesses, with new store openings and the completion of a bedding manufacturing plant. Ngwerume expressed hope for improved economic conditions: “Our efforts to boost demand in the formal market through close partnership with retailers have started to pay dividends,” he noted, adding that Axia remains committed to expanding its market share by entering new markets and increasing product offerings.

Ngwerume expressed gratitude to the board, staff, and stakeholders for their dedication citing that the group’s “proactive measures to address economic shifts and consumer preferences will play a pivotal role in sustaining and potentially increasing market share.”