RETAIL giant, OK Zimbabwe released its financial results this week at an analyst briefing where the company’s profit after tax ballooned 174,6% to $16,6 million during the period ended March 2018 from $6 million recorded the prior year. The company bemoaned the cost of sourcing foreign currency which had the inevitable effect of increasing prices during the period.
By Fidelity Mhlanga
NewsDay Business Reporter Fidelity Mhlanga (ND) talked to OK Zimbabwe chief executive officer Alex Edgar Siyavora (AS) soon after the analyst briefing this week spoke to get more insights about the company’s operations and the its future prospects in light of forex shortages.
Below are the excerpts of the interview.
ND: Firstly, can you tell us how you posted huge profits during the period?
AS: The presentation shows that our gross profit margin actually came down but the sales went up. When you have such a structure and fixed costs, those increases your profitability. If your increased sales give you gross margin, gross margin is already profit. That’s how come you see a bigger growth on the profit than the sales.
ND: The company’s revenue rose by 23,4% to $582,8 million, What can be attributed to this growth in revenue?
AS: There was no change in employment numbers. So, from employment, the disposal income has remained at the same level.
We feel that a good previous agricultural season and this one have put some money in the hands of people in the bottom of the pyramid and they were able to consume more.
ND: Do vendors who sell their wares in the streets impact your business?
AS: Vendors are very disruptive because there are customers who do not want to be interrupted when they come for shopping. But, vendors don’t have the quality of the products we have, especially on fruit and vegetables.
The quality of the products make customers prefer our products than those from vendors. A typical Zimbabwean wants to push a trolley, so the quality of the products and correct pricing will lead to people coming into the shop.
ND: But products sold in the streets are priced lower than those in your supermarkets?
AS: We are contending with two issues here; products are exposed when they are outside and a discerning shopper will know that they are compromised and will avoid them. That is why I talk about quality. It can be same label but the same label that’s not preserved is different from the one that is well preserved.
ND: At the same time the majority of Zimbabweans have low disposable income and go for such less preserved products.
AS: Remember I talked about agriculture and also earnings from mining activities. There is a bit of income generation which is not recorded.
ND: During your presentation, you mentioned that bank charges by suppliers were taking a toll on your business. May you explain this?
AS: When you are using your card, the merchant is charged by the bank for processing a customer’s card and if a customer also pays something, the merchant is also charged, so as you do more transactions you are picking up more costs.
ND: So how does this affect your business?
AS: It does, but it doesn’t affect its profitability because it’s a variable cost. If it was a fixed cost, it could paralyse the business, but to the extent that is driven by sales it does not affect business.
ND: May you tell us about the shop refurbishment plan as well as the opening of new shops?
AS: No, we are not putting that in the public domain at the moment. We will tell you in due course. When we are ready, we will put it into the public.
ND: How much have you spent on renovations last financial year?
AS: It depends. On a bigger shop it can cost in the excess of $1 million to $1,2 million because you will be changing equipment, relaying the floor and redoing the shelves.
ND: How are the forex shortages affecting your business?
AS: They are impacting us because forex is difficult these days but we have SMEs (small to medium enterprises) who have got ways of getting forex.
ND: How is Kawena helping you import some products into the country?
AS: They pick deposits from Zimbabweans in South Africa and they use that money to import products into Zimbabwe. But, it’s not at the level we would want it to be because I think they are also dealing with competition because they are a lot of money remittance companies operating.
ND: What’s your impression on the economic outlook given the upcoming elections?
AS: I don’t know, but from the message we are getting from the government for the economy to grow, we think we will benefit as business.
So that’s the premise in which we look out.
ND: What is your general impression on the outlook?
AS: I think it is positive…