eBusiness Weekly
Enacy Mapakame
Ok Zimbabwe, arguably the country’s biggest supermarket chain, is forecast to report revenue increase of 21 percent to $704,8 million when it releases its full-year financial earnings in the second half of 2019.
According to analysts at Harare brokerage firm IH Securities, the retailer will cash in on the increased use of plastic money at a time competitors in the informal sector are demanding cash or US dollars upfront, especially for products in short supply.
Growth will also be hinged on various expansion programmes and OK’s ability to withstand competition from wholesaler-cum-retailer groups like N. Richards and Metro Peech, which have gained popularity, they say.
Net income is seen soaring 47 percent to $24,4 million from $16,6 million in the comparable year ago period. Earnings before interest, depreciation, tax and amortisation are guided to rise 33 percent year-on-year to $42,3 million. Increases in procurement costs are expected to put pressure on margins although EBITDA margin will grow 6 percent.
“Overall, we anticipate the current momentum at OK Zimbabwe to continue in FY19,” said IH Securities.
“With declining rate of revenue growth and increase in the cost of operating, margins are likely to come under some pressure going forward.”
A spike in the prices of goods and services in October led to a severe shortage of basic food stuffs countrywide. Items such as cooking oil, sugar, flour and bread were all in short supply, something which could have hurt both sales and earnings.
Management at OK Zimbabwe have indicated that the $356 million-valued company will continue on its expansion drive as well as refurbishments as it defends its market base. The projects contributed to the group’s strong performance in the half year to September 30 where revenue rose 23 percent to $330 million.
OK opened a new outlet in Glen View, which apparently made a noted contribution to earnings coupled with refurbishments of OK Marondera and Bon Marche Chisipite. This also increased total operations capacity by 1,735 square metres.
But the obtaining foreign currency shortages should have an impact on the retail sector’s ability to import products mainly from South Africa to augment local production that is experiencing supply gaps also on account of limited foreign currency for raw materials procurement.
For the half-year, supply remained relatively stable despite an increase in the cost of procuring stock and foreign currency shortages. Gross profit margins remained stable at 17,5 percent while overheads increased by 18,4 percent to $45,7 million in line with inflation and the expansion drive.
On the local bourse, OK’s performance should be on the downside year-on-year with a target price of 29 cents, with a hold recommendation.
OK Zimbabwe operates a total of 63 outlets, 49 OK Supermarkets, eight Bon Marche and six OK Mart while 46 bakeries are running.
