Powerspeed sees pressure on margins
Powerspeed Electrical Limited, a hardware and electrical goods supplier, says its margins came under pressure in the third quarter to June 30, 2021, weighed down by a number of challenges that negatively affected the business environment.
The period under review was characterised by supply chain disruptions due to Covid-19 induced lockdowns, which resulted in increased costs.
Additionally, operators battled competition from the informal sector.
Local industry has for years bemoaned the influx of lowly-priced imports sold by informal traders, some of whom sell at formal businesses’ doorsteps.
“Margins have been negatively impacted during the period as a result of real increases in commodity prices, significant logistics cost increases and an increasingly competitive hardware market, both formal and informal,” said company secretary Martin Gurira in a trading update.
“Increasing lead times being experienced by global, regional and local supply chains has affected working capital management efficiency,” he said.
Volumes have been affected by reduced trading hours in line with lockdown regulation. Currently, businesses open from 8am to 3.30pm.
The Confederation of Zimbabwe Retailers (CZR) has already made calls to the Government for an extension of trading hours for the retail sector to 5pm. For Powerspeed, the lockdowns have also negatively impacted staff availability.
The group said it was working on strategies to expand branch networks as well as market segments.
Said Mr Gurira: “We continue to mitigate the impact of COVID-19 through compliance with best practice and regulatory COVID-19 protection measures although the business continues to be negatively impacted through reduced trading hours and curfew-impacted staff availability.
“We are mitigating an increasingly competitive industry by continuing to pursue new market segments, widening our branch footprint, and expanding global sourcing of all products directly from the best manufacturers.”
Despite these challenges, trading volumes remained strong and profitability steady, as a result of a boom in domestic construction and Diaspora remittances.
Local demand for construction material has remained strong with the sector upbeat of maintaining the same trajectory going forward driven by individual residential developments and several Government infrastructure projects.
According to Powerspeed, shareholders’ funds grew by 3,5 percent in the quarter in real terms. Revenue rose by 572 percent in historical terms compared to the same period in the prior year.
Going forward, Mr Gurira said management remains focused on increasing stock levels to mitigate supply chain difficulties within the constraint of their financial resources.-herald.clz.w
