Companies to remain inside shells this year

Listed companies have shown ‘cautious optimism’ for the year 2024 due to various issues as shown by their outlook statement in recent trading updates and financials.

The companies have lamented a cocktail of problems which include, water issues, electricity, inflation, currency volatility and policy inconsistency in their quest for continued cost management measures in the current calendar year.

What the companies are saying

Brickmaker Willdale says the poor electricity supply has hampered operations, especially in the extrusion and firing of structured kilns, resulting in reduced output.

“We will continue to engage ZESA to improve electricity supply to the operations,” the company said in its trading update for quarter ended December 31, 2023.

In its trading update for the third quarter ended December 31, 2023, OK Zimbabwe revealed that “persistent price changes adversely impacted consumer demand and supply dynamics”.

This comes as the market is characterised by the continued depreciation of the local currency against the US dollar.

Also, formal business is mandated to use the official exchange rate with a 10 percent limited margin, which resulted in a large loss of volume for the informal sector, which had greater exchange rate freedom.

“Looking ahead, the group remains optimistic about its future prospects and recognises the need to adapt to the changing operating environment.

“The business is focusing on delivering value to its customers by enhancing the customer experience, executing fair pricing, improving market presence, and optimising operational efficiencies for long term sustainability,” OK Zimbabwe said in its outlook.

Zimbabwe’s resource mobilisation tactics currently prioritise the ordinary citizen because of low domestic output, continued foreign isolation and limited credit availability.

Delta stated that the policies enacted in the budget for 2024 will significantly affect the industry and the market as a whole.

“The beverages sector will be affected by the sugar tax and the restrictions arising from policies impacting the route to market,” the company said in a trading update for the third quarter ended December 31, 2023.

“Aggregate demand may be impacted by the high inflation and reduced foreign currency inflows arising from lower mineral prices and the anticipated reduction in agricultural output resulting from the forecasted below normal rainfall.”

Conversely, NTS welcomed the government tax measures, saying they would level the playing field.

“The company is optimistic that the new regulations on tax introduced by the government to enforce compliance will minimise unfair competition in the market,” the company said in a trading update for the third quarter ended December 31, 2023.

“NTS is focused on full business recovery premised on remodelling the business and continued implementation of a raft of cost-cutting measures introduced during the year.” ART expects the operating environment to remain volatile.

“The group will continue to implement difficult short-term measures to safeguard profitability and liquidity to enable the business to withstand an extended period of uncertainty,” the company said in a trading update for the first quarter to December 31, 2023.

For Tanganda, “the operating environment is expected to remain volatile and complex due to continued inflationary pressures, currency instability, escalation of costs and reduced consumer disposable incomes”.

“Business welcomed the extension of the multi-currency regime to 2030 as this is expected to facilitate some stability within the economy.”

Experts on cost containment strategy

Financial experts in relation to the positions of companies said cost management during inflation and currency devaluation can be challenging, but there are strategies companies can employ to mitigate these challenges.

Accounting experts, agreed that while cost containment measures are essential for managing expenses, they may not always bring the desired results for a company.

Shepherd Ngorima, an accountant with a local firm said; “Cost containment measures are crucial for maintaining financial health, but they must be implemented strategically. Sometimes, companies may focus solely on cutting costs without considering the potential impact on quality, customer satisfaction, or long-term sustainability.”

He added that its essential to balance cost reduction efforts with maintaining value and competitiveness in the market.

A financial director with a local company on the request of anonymity said cost containment measures can be effective, but they must be aligned with the company’s overall strategic objectives.

“Simply slashing expenses indiscriminately can lead to short-term gains but may undermine the company’s ability to innovate or invest in growth opportunities. It’s vital to prioritise cost-cutting initiatives that support the company’s long-term goals and enhance its competitive position,” he said.

Chartered accountant, Chenai Akili, believes cost containment measures are only part of the equation for financial success.

“Companies also need to focus on revenue generation, operational efficiency and risk management.

Overemphasis on cost reduction alone may hinder investment in critical areas such as research and development, employee training, or marketing, which are essential for driving future growth. A holistic approach to financial management is necessary to achieve sustainable results,” she said.

While cost containment measures are important for managing expenses, they are not guaranteed to always bring the desired results for a company. It is crucial for businesses to approach cost management strategically, considering the potential trade-offs and ensuring alignment with their overall objectives and values as they try to protect themselves in 2024.-ebusinessweekly