Companies begin to recover

Zimbabwe Stock Exchange (ZSE) listed companies are beginning to see business recovery with sales volumes registering growth, thanks to the improved operating environment.

From food manufacturers, furniture retailers, media, construction and related stocks, there is a general improvement in business owing to normalising environment following lifting of lockdown restrictions coupled with stable foreign currency exchange rate.

Quarterly earnings reports released for the period to September 30, 2020 are showing growth year on year as well as compared to the previous quarter.

The three months to September 30, 2020, saw the country gradually ease Covid 19 lockdown restrictions. Prior that, the country was in various levels of lockdown since it was effected on March 30, 2020. Other businesses had to endure the whole of April in total shutdown, in compliance with lockdown restrictions to limit the spread of the pandemic, which had a knock on effect on earnings.

But the easing of lockdown restrictions coupled with a more stable foreign currency exchange rate ushered in a more stable environment for businesses to thrive.

For diversified industrial conglomerate, Innscor, volumes began to pick during the first quarter to September 30, 2020.

“The trading environment for the quarter under review was underpinned by improved business and consumer confidence arising from a relatively stable local currency, a significant decline in local inflation and the easing of Covid-19 lockdown restrictions.

“These factors combined to result in a trading-oriented focus for the Group, with solid volume growth being registered across most of the Group’s product categories,” said the group in a trading update for that quarter.

Innscor also attributed the growth to a more stable foreign currency exchange rate after the Reserve Bank of Zimbabwe (RBZ) introduced the auction system in June as a way to ensure availability of the much needed foreign currency in a more transparent manner as well as tame the exchange rate.

Said Innscor: “The introduction of the foreign currency auction system and Statutory Instrument 185 of 2020 allowed for the implementation of precise pricing strategies, enhanced planning capability, improved capital allocation and value preservation for the group’s business units; these policy measures are extremely encouraging.”

Biggest food manufacturer in Zimbabwe, National Foods Holdings Limited, reported a 15 percent growth in overall sales volumes for the three months to September 30, 2020. As trading hours improved with relaxation of lockdown restrictions, sales for businesses also began to increase.

At Axia Corporation transacting in foreign currency also helped mitigate liquidity constraints. In July, Government allowed the use of foreign currency for local transactions, which has worked well for the specialty retail and distribution group.

“The gradual easing of lock-down restrictions has improved people movement and business trading hours resulting, to some extent, in a general upswing in recent volumes,” said Axia.

Its flagship, TV Sales & Home, recorded sales volumes 48 percent higher than the comparative quarter, which led to significant growth in turnover.

According to the group, the business was holding reasonably good stock balances, it was able to supply the market to meet demand and has opened its 50th store, in Mutare, during the month of October and which is the biggest store by area.

Across sectors, cement maker – Lafarge’s chairman Kumbirai Katsande, said the easing of lockdown restrictions enhanced demand for products and the business recorded solid gross profit margins exceeding targets on the back of cost containment measures.

“The operating environment showed improvement influenced by easing of the Covid 19 lockdown restrictions.

“As business activity progressively continued to gain momentum into Q3, the demand for cement consequently outstripped supply causing considerable supply backlog,” he said.

Sales volumes closed the quarter 7 percent above same period last year driven by recovery in the individual home builder market.

Demand for cement in the construction sector jumped 34 percent ahead of the previous quarter following the reopening of the economy after lockdown.

Turnall Holdings Limited also indicated increased demand for its products during the same quarter, thanks to easing of lockdown restrictions. The group’s sales volumes for the quarter were 11 percent above same period last year and 81 percent above the previous quarter that was adversely affected by the pandemic.

The same can be said of brick making firm, Willdale, which reported sales volumes jumped to 49 percent that is above same quarter prior year, bringing year to date volumes to 12 percent above prior year.

Spirits and wines maker, African Distillers Limited (Afdis) volumes for the first quarter to September 30, 2020 jumped 28 percent compared to the same period last year on the back of good sales mix.

At Padenga, the easing of lockdown restrictions across the globe is beginning to see the business record more activity in the crocodilan business, which was affected by the pandemic more than the recently acquired gold mining business.

Chairman, Thembinkosi Sibanda, said Covic 19 related lockdowns prevented the scheduled skin sales gradings during Q2 and Q3 from occurring.

“The Covid 19 pandemic continued to pose an ongoing threat to business continuity as it impacted traditional markets in those countries that the business trades skins into.

“However, with the easing of lockdowns the two main retailers of high-end leather goods both reported improved sales volumes across all product categories in Q3 in their trading updates.

According to the group, 22 796 crocodiles had been harvested by end of the quarter under review and the skins were awaiting sales grading to be convened when international travel resumed.

A total of 18 629 skins were graded following lifting of travel restrictions in October with 6 260 of those already shipped in that same month while the remainder are scheduled for shipping this month.

However, demand for crocodile meat remained depressed during the quarter and the group is looking at growing local market to absorb product until international export market returns.-ebusinessweekly.co.zw