Currency woes, late payments hamper Bridgefort
ZStock Exchange ( ZSE)
IMBABWE listed firm, Bridgefort Capital Limited says it recorded a US$ 260 000 loss for the year to December 2023 as its business suffered from delay in payments, exchange losses, and a myriad of challenges that drew back its operations. Michael Nicholson, Bridgefort Capital Company Secretary, said the business experienced significant delays in payments from key customers (supermarkets) and its inability to adequately hedge its Zimbabwe dollar debtors.
Consequently, its operations particularly that of Chicago Cosmetics division made a small profit while the distribution business suffered from severe exchange losses on Zimbabwe dollar balances.The macroeconomic environment generally deteriorated since the beginning of the year characterised mainly by runaway exchange rates.
According to Bridgefort, the company was also affected by the delay in payment of foreign currency it had purchased from Reserve Bank of Zimbabwe ( RBZ) through the auction system last year.
The money remains unpaid and the auction has not been functional since it was closed for the holidays in December 2023.That money is no longer after the Reserve Bank of Zimbabwe, in its 2024 Monetary Policy Statement, converted all outstanding auction allotments into a two (2) year ZiGdenominated instrument at an interest rate of 7.5 percent per annum. ZiG is Zimbabwe’s new currency.
However, the company managed to receive a total of US$ 170 000 for legacy debts from the RBZ, during the year under review, which provided muchneeded relief for MedTech and its suppliers.
“In terms of income statement performance as measured by the change in the equity value in USD, MedTech incurred a loss of about US$ 260 000 with US$ 130 000 of this being attributable to the Class A Portfolio.” This loss highlights the unsustainability of sales to the formal retail sector in ZWL when this can’t be hedged with bank borrowings,” said Nicholson.
According to Bridgefort Capital loss of local currency’s value in the period under review posed a threat to formal business particularly, the large retail chains, and accounts owing to momentous distortions in the market.”Unfortunately, Med
Tech Distribution is a small supplier of slow-moving products and has not been able to improve on the credit terms or the currency of invoicing.”
The introduction of a myriad of taxes by the government has also afflicted the company’s operations and according to Bridgefort Capital, the changes have potential to reduce formal businesses competitiveness against the informal sector.
On the other hand, the 2024 financial year generally took off slowly with many businesses reporting reduced volumes but Bridgefort’s challenges were compounded by turbulent electricity generation and supply.
Electricity remains a cause for concern as the price increased from being “unrealistically cheap” to being expensive and that goes along with other various rates and bills as charged by the City of Harare.
The company also lamented measures such as the route to market legislation arguing that it is unlikely going to fully resolve the said challenges.
Operationally MedTech sales declined by two percent in dollar terms, whilst
US gross profit declined by 16 percent stemming from the reduction in higher margin distribution sales and an increase in manufactured products at a lower margin.
The company did not declare a dividend since no dividends were received from portfolio companies.
Going forward the company said overspending by government coupled with quasi-fiscal activities at the must be
RBZ addressed for stability to return in the general economy.
Formerly MedTech Holdings, Bridgefort is a manufacturing, retail, distribution and services company in Zimbabwe. The company operates in three market segments; fast-moving consumer goods, medical supplies and manufacturing of light industrial products.
The division manufactures and
FMCG markets personal care products, and the medical division produces pharmaceutical products for wholesale distribution to retail pharmacies.
MedTech has retail outlets in Harare and Bulawayo, and a manufacturing plant that produces petroleum jelly and glycerin, health, beauty and personal hygiene products and over-the-counter pharmaceutical products for the local Zimbabwe market as well as for export to Mozambique and Zambia through its subsidiary Baines Imaging Group.