CHAIRMAIN'S STATEMENT JUNE 2009
REVIEW OF CURRENT OPERATIONS
The Group experienced across the board volume declines during a very difficult year characterized by hyperinflation, falling real disposable incomes, steeply devaluaing currency and problematic pricing distortions. As previously reported in the interim results, ZESA power cuts during the critical fruit set months of the 2007/2008 citrus season resulted in citrus production and exports volumes declining by 50% and 55% respectively.
CITRUS
Despite lower yields due to a lack of timely availability of inputs, the sale of soya beans and maize crops using barter deals achieved good hard currency denominated returns.
BEVERAGES
The newly established Beverages division made significant inroads into a very competitive market with its fruit based Marlon range of crushes and syrups.
TRADING
The introduction of FOLIWARS during the fourth quater of the year marked the beginning of a firm recovery of columes and profitability for the beverages, imported FMCG agency and fresh produce businesses. The fresh produce volumes had collaped to about 10% of prior year because of pricing and currency issues.
FLOWERS
The Flowers division continued to suffer volume declines arising from old and low yielding bushes and management challenges. Six hectares were replanted towards the end of the year as part of the three year bush replacement program. While the prices in December were very poor, average euro back on farm return per stem was higher than prior year.
Further to the cautionary statement issued on 12 February 2009 management are of the opinion that the current season crops are not at risk and that discussions with the relevant authorities regarding the tenure on the land are continuing.
DIVIDEND
Due to the need for working capital and to fund volume recovery no dividend has been declared.
OUTLOOK
While the liberalised and dollarised economy provides a welcome stable and conducive business environment it also calls for changes to business models, aggressive review of cost structures and management of pricing excesse from competitive and monopolistic utility providers. The Group is responding to the challenges of this changed environment which we hope is sustainable. The crops' division is expecting good yields from the summer crops which are looking good and the 63% full dam augurs well for winter cropping. Profitable volume recovery is forecast in our beverages, fresh produce farming, fresh produce trading, citrus and imported FMCG agency divisions.
The effect of the global recession on demand and prices for our rose flower exports to Europe has been pronounced since December 2008. Consequently the seven hectare rose bush replanting schedule to begin in May 2009 has been shelved and further scaling down of hectarage is expected in the next few weeks. Some greenhouse infrastructure will be switched to fresh produce production until flower export business becomes profitable again.
BY ORDER OF THE BOARD
L. N Chipango
Chairman
17 JUNE 2009
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