EEC profit drops by 60.5%

MBABANE - The Eswatini Electricity Company (EEC) closed the year (2022/23) with a profit after tax of E83 million compared to E211 million in the previous year.

This depicts a decline of about 60.5 per cent.

According to the company’s integrated annual report for the financial year 2022/23, net profit was significantly boosted by the E67 million tax credit, which resulted of the tax computation for the year.

The company reported that the profit after tax line had been trending downward over the past five years, mainly due to the cumulative effect of adverse tariff decisions while absorbing very high increases from electricity import tariffs.

It was noted that operating costs remained under strict control as cost containment measures remain a key survival strategy for the company.

Value

The financial position indicated that the company’s total assets value at the end of the year stood at E5.684 billion, an increase of 5 per cent from last year’s reported position of E5.401 billion. Non-current assets increased by 9 per cent from E4.117 billion to E4.482 billion.

The increase in non-current assets was mainly due to the company’s continued investment in the supply network infrastructure projects. Major capital projects completed during the year included two substations at Malkerns and Siphocosini as well as a new depot in Mankayane.

During the year, a total of E584 million (2022: E510 million) was spent by the company on additions to property, plant and equipment to maintain operating capacity.

Meanwhile, the company’s investment in Mozambique Transmission Company (MOTRACO) increased by 4 per cent to E462 million (2022: E445 million).

Effect

The increase was reportedly due to the combined effect of share of profits and foreign exchange gains recognised during the year, which was partially offset by the dividends received.

Current assets as at March 31, 2023, amounted E1.202 billion (2022: E1.285 billion) which included cash amounting E210 million, short-term investments of E433 million, trade receivables of E281 million and inventories at E170 million.

EEC noted that the inability of customers to effect timeous payments had been a crucial indicator of the general economic challenges they faced. This situation affects the ability to collect effectively; a situation that adversely impacts the company’s cash flow.

EEC continued to pursue various strategies to ensure the working capital efficiency of the business. Total liabilities showed an 8 per cent increase from E1.654 billion to E1.787 billion.

The increase was mainly due to additional drawdown from the World Bank loan and rural electrification grants received during the year, which had been recognised under deferred income.

Overall

The company’s net asset (equity) value stood at E3.898 billion (2022: E3.748 billion), an overall increase of 4 per cent from the previous year. The increase in shareholders equity was a result of the retained profits plus other gains recognised during the year.

The company closed the year with a positive cash balance of E210 million (2022: E90 million). This E120 million net increase in cash was mainly due to the drawdown from the World Bank loan facility, matured financial investments and dividends received from MOTRACO. The company closed the year with a healthy liquidity position.

The current ratio and acid test ratio show a good solvency position at 2.6 and 2.3 times respectively at the end of the year.