eBusiness Weekly
Enacy Mapakame
For the past fortnight, companies listed on Zimbabwe Stock Exchange (ZSE), have been releasing quarterly earnings updates for the period to September 30, 2019 as well as reports for half year performance.
From light manufacturing, fast food, retail, hospitality, transport and logistics as well as construction and construction related sectors, firms have released figures pointing southwards, reflective of the obtaining economic environment.
This year, the economy has battled limited foreign currency, devaluation of the local currency, which was re-introduced in February as well as erratic power supplies that added to industry woes.
Earnings reports released so far for the three months and six months to September, show volumes across sectors have significantly plummeted as inflationary pressures continue to erode consumer disposable incomes.
Cash squeeze has also not done any good for many companies.
The country’s biggest company by market capitalisation, Delta Corporation, reported a depressed volume performance for the period under review. Lager beer volume went down 40?percent for the quarter to September 30 and by 48?percent for the half-year period.
The soft drinks category was not spared from the economic headwinds, with volumes retreating by 56 percent.
This comes as consumers downgrade to value brands as they cushion themselves from the challenging environment. The consumers took comfort in cheap substitutes, most of them smuggled into the country.
However, low value brands such as the Sorghum beer categories also went down 29 percent for the quarter and 15 percent for the half year, reflective of the waning disposable incomes.
Its associates Afdis also recorded a soft volume out-turn due to difficulties in accessing foreign currency. As a reactive measure, the entity “continues to launch products with a lower foreign currency content”.
Further, Schweppes recorded a 33 percent beverage volumes fall for the half year on the back of depressed consumer demand and difficulty in accessing imported raw materials.
Diversified industrial group, Innscor Africa performance also shows a volumes decline across its major businesses during the quarter to September on consumer down trading.
National Foods volumes went down 36 percent on declines in flour and maize categories as the country grappled flour shortages due to low wheat supplies as a result of foreign currency shortages. Colcom also recorded a decline of 17 percent in volume.
However, Natfoods is poised to cash in on maize imports after Government allowed companies with free funds to import grain directly into the country to offset the effects of low output due to the El-Nino induced drought experienced in the 2018/19 season.
Indications are that the country needs 800 000 maize imports to meet demand for human food consumption as well as livestock feed.
On average at least two million tonnes of cereals are required for both human and livestock consumption annually.
Elsewhere, Turnall reported a 31 percent decline in volumes for the third quarter period to September while year to date sales volumes also went down 28 percent compared to same period in the prior year on the back of a fall in aggregate demand that was a result of income erosion.
The economic headwinds have not spared the hospitality industry as occupancies at African Sun went down 32 percent during the quarter under review on the back of impact of the macroeconomic and political development.
There is, however, higher hope that the incentives introduced effective January 2020 by the Minister of Finance and Economic Development during the presentation of the $63.6 billion 2020 budget including tax cuts and duty free consumables will stimulate growth in the hospitality sector.
Other consumer oriented stocks, OK Zimbabwe, PPC Zimbabwe, Axia and Simbisa’s performances also mirrored the broader economic environment obtaining in Zimbabwe.
OK Zimbabwe’s sales volumes for the half year to September 30, 2019 went down 23 percent compared to same period last year on the obtaining challenging economic environment.
For the retail giant, foreign currency shortages resulted in a slowdown in the importation of merchandise while power blackouts that are being experienced across the country also affect operations such as in-store bakeries.
Many firms resorted to the use of diesel powered generators that consumed thousands of litres daily depending on the nature of their operations.
The re-introduction of local currency and abolishment of the multi-currency system for local transaction and settlements resulted in a depreciation of local currency and increase in prices of goods and services, a problem that affected other consumer stocks such as Axia and Simbisa.
Regional cement maker, PPC also said volumes and revenue went down 30 percent and 54 percent respectively against the backdrop of a hyperinflationary environment, severe weakening of the local currency, erratic power supplies as well as a weaker cement market.
However, it is not all doom and gloom.
Diversified mining group RioZim reported a 9 000 percent jump in profit to $38 million for the half year to June 30, 2019 compared to $0,4 million in the same period last year despite the challenging macro — economic environment.
Revenue came in at $136 million representing a 207 percent increase on prior year comparable period. Basic earnings per share surged 9 000 percent to 31,42 cents while assets grew 500 percent to $1 billion.
Although gold production went down due to power outages, RioZim indicated that some of the policies made during the year enabled the company to get a slightly better realisation of the value of its export proceeds at close to market price which helped boost its earnings.
Also on the upside, financial services group FBC an operating income of $388,6 million was achieved for its financial year 2019 third quarter, representing a growth of 96 percent on prior year.
Profit before tax went up 110 percent to $189 million, while its balance sheet rose 63 percent, while the equity position was 29 percent firmer.
With no immediate solution to the economic headwinds being experienced, market watchers anticipate more pressure on disposable incomes which will affect business performances across sectors. The market will continue to downgrade especially on discretional consumer goods for basics. For the banking industry, upward reviews in service charges will do well for the sector while export oriented firms such as Padenga will also be in a better position to survive the headwinds.
