Delayed VAT repayments wipe ZAMEFAs H1: earnings...
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In a stock exchange news posted on the Zambian bourse’ website, ZAMEFA half year headline earnings for the period ended March 2018 slid by 99% to ZMW226,000 (about USD22,600), compared to ZMW19million (about USD1.9million) a year ago exactly, in the same period.
Revenues declined by a marginal 1.5% in the same period to ZMW592million (about USD59.2million) compared to ZMW583million (about USD58.3million), which was attributed to a fall in the average price of copper on the London Metal Exchange – LME.
Company Chief Executive Officer – Rosetta Chabala attributed the half year decline in profitability to delayed input Value Added Tax – VAT refunds and export duty impacting funding costs for the company. This resulted in decreased trading activity and a double widening of its finance costs to ZMW13million from ZMW7million in the period under review.
Further, a lower export volume of copper wires, rods and conductors in the period due to decline in demand from its main export markets was a major driver of the company’s slowdown in earnings.
The cable company, was incorporated to ensure a boost in value chain development of the vast copper mining industry in addition to creating employment for citizens. However, ZAMEFA faces ferocious competition from a more aggressive competitor Neelkanth Cables, a company which is reported to be relatively growing its revenue at a much faster pace. Neelkanth recently injected USD15million in recapitalisation of its operation to tap into the copper value addition chain.
ZAMEFAs operating environment continues to be characterized by tight liquidity, mainly due to non-settlement of government and quasi government debt. This covers mainly the power utilities that the cable company supplies wire to – the likes of ZESCO. Efforts to get a response from Company Secretary Stephen Sikombe proved futile.
Minister of Finance, Margaret Mwanakatwe has expressed urgency in dismantling arrears which have had a ripple effect affecting operations of some key corporate entities that have grappled to offset obligations with commercial banks contributing to the rise in industry non-performing loan stock. Further, state owned entities – SOEs owe corporates such as ZAMEFA which has cost the Luanshya based copper cable company high finance costs in alternative sources of funding to bridge the gap to ensure business operational continuity. It is however not clear how long it will take for the Finance Ministry to dismantle outstanding arrears that stand at ZMW12.7billion.
It is also vague as to how the Finance Ministry will deal with the interest being accrued on arrears by the companies owed and whether the companies will be compensated for the delays as most of these companies had borrowed these funds from financial service providers and banks. Zambia’s current fiscal challenges are manifesting in the capital markets evidenced by erosion of earnings posted by listed entities.
ZAMEFA shares are trading for ZMW4.82 per share on the Zambian bourse as at 06.55am on the LuSE.