REPORTING CONTEXT ABOUT US OUR OPERATING CONTEXT OUR PERFORMANCE OUR LEADERSHIP GOVERNANCE OUR FINANCIAL STATEMENTS SHAREHOLDERS' CORNER CAPITAL CAPITAL TRADE-OFFS In creating value, we draw from, contribute and transform the capitals available to us, remaining mindful that these trade-offs align with our values and principles. Significant trade-offs during the year includes those discussed below: • The marked increase in inflation during the year materially increased the cost of our raw material inputs and other production and operational expenses, and also affected consumers’ disposable income. Wherever possible, we chose not to increase our prices to cushion the impact on consumers. • Our employees were also impacted by the increase in inflation, particularly through rising food and fuel prices. We provided assistance to the employees most affected in the form of gift packages and food coupons. • In response to the ongoing supply chain disruptions and the increasing price of inputs, we planned further ahead and increased our stock holdings of raw materials (natural capital) and packaging inputs (manufactured capital). • A number of the projects we implemented during the year aim to reduce our use of natural capital and environmental impact. These include a new rainwater harvesting system at Nouvelle France, solar system at the Limonaderie and a pilot project to test electric vehicles in our fleet. • We continue to invest in developing our human capital through training and development, this year rolling out behaviourbased values, introducing service excellence training and launching a sales academy to align, upskill and inspire our internal talents. • We continue to drive the circular economy through PhoenixEarth, working with partners, government and various NGOs to participate in, sponsor and support programmes to collect plastic packaging for recycling and reuse, promote awareness in schools and communities, drive social media campaigns, provide additional bins to reduce litter and participate in the harbour clean-up programme. OPERATING OUR OPERATING CONTEXT GDP growth in Mauritius recovered in 2021, growing 3.6% following the 14.6% contraction in 2020. Growth for 2022 is forecast at 7.2%, which would take the economy back to less than 1% higher than 2019. This forecast growth for 2022 is heavily dependent on tourism, which before Covid-19, contributed roughly 8% to GDP annually. With Mauritius closing its borders from March 2020 to October 2021, the tourism industry contracted 77% in 2020 and a further 22% in 2021. The 2022 forecast GDP assumes growth in the tourism of more than 200%. While monthly tourist arrivals are trending upwards, they remain well below pre-pandemic levels. GDP growth (%) and international tourist arrivals (m) 15% 10% 5% 0 -5% -10% -15% 1.4 0.4 -0.6 -1.6 4.0% 2018 2019 2020 -14.6% 2021 2022 2.8% 3.6% 7.2% Headline inflation 10% 8% 6% 4% 2% 0% Jan 16 May 16 Sep 16 Jan 17 May 17 Sep 17 Jan 18 May 18 Sep 18 Jan 19 May 19 Sep 19 Jan 20 May 20 Sep 20 Jan 21 May 21 Sep 21 Jan 22 May 22 Import Price Index (2018=100) Q118Q218 Q318 Q418 Q119Q218 Q318Q418 Q120 Q220Q320 Q420 Q121 Q221Q321 Q421Q122 MUR vs USD chart Jun17 Jan18 Aug18 Feb19 Sep19 Mar20 Oct20 May17 Nov21 Jun22 46 44 42 40 38 36 34 32 30 Source: Statistics Mauritius Note: 2022 tourist arrivals are for the eight months to August 2022. Source: Statistics Mauritius Source: Statistics Mauritius Source: Mauritius Commercial Bank As an island nation, Mauritius is heavily reliant on imports, the price of which increased steadily from the start of 2021 as a result of global inflation and the devaluation of the Mauritian Rupee against the US Dollar and Euro. At the end of the first quarter of 2022, the import price index was 40% higher than Q1 2021. PhoenixBev experienced significant increases in the cost of our imported inputs. The Mauritian Rupee has continued to depreciate against hard currencies since the start of the pandemic, exacerbated by the decrease in foreign currency brought into the country by tourists. At 30 June 2022, the Mauritian Rupee was 15% weaker against the US Dollar and the average rate for PhoenixBev’s 2022 financial year was 7.8% weaker. This depreciation contributes to inflation in the cost of imports. Many of PhoenixBev’s customers are in the hotel/ restaurant/ café (Horeca) industry and were significantly affected by the closure of international tourism. From the middle of 2021, headline inflation in Mauritius rose rapidly and significantly, affecting consumers’ disposable income and impacting the price of raw materials and production costs GDP Tourist arrivals 25 Phoenix Beverages Limited Integrated Report 2022 24 Phoenix Beverages Limited Integrated Report 2022
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