Q3 results show encouraging signs

Zimbabwe Stock Exchange (ZSE) listed firms have demonstrated some resilience despite Covid-19 ravaging the economy and way of life, with most companies reporting year-on-year sales volume growth for the three months to September 2020.

Economic instability, a volatile exchange rate, runaway inflation and Covid-19 combined to make the operating environment hostile for many businesses.

But their resilience, supported by exchange rate stability as well as a slowdown in inflation, saw listed firms pushing volumes that were higher than those sold in the three months to September 2019.

A possible enabler to this growth could be the slowdown in inflation experienced in the three months to September 2020 when compared to what was experienced prior year comparative.

Last year, consumers had to contend with month-on-month inflation of 21 percent, 18,1 percent and 17,7 percent for July, August and September 2019 respectively. This year the rate of price increases were lower at 35,5 percent, 8,4 percent and 3,8 percent for July, August and September 2020 respectively.

While last year, the exchange rate doubled between July and September 2020, this year, it has remained stable for the comparative three months thanks to the introduction of the foreign currency auction trading system supervised by the Reserve Bank of Zimbabwe.

The introduction of the Foreign Currency Auction System and Statutory Instrument 185 of 2020 allowed for the implementation of precise pricing strategies by businesses while enhancing budgeting and spending capability by consumers.

This sense of stability must have brought confidence to consumers to spend again even though wages and salaries still lag price increases that have been witnessed across the economy.

The most encouraging consumer spend must be that recorded by Axia at its TV Sales & Home business unit.

When the economy is struggling, you would expect consumers to cut back on big ticket spending, but in what could be a sign of returning confidence, sales volume for TV Sales & Home, for the three months to September, were 48 percent higher than the comparative turnover.

The uptrend seems to be across board with the construction and related products sector also registering not only recovery from the Covid-19 induced first half slump, but ahead of what was achieved for the three months to September 2019.

At cement maker Lafarge, sales volume for the three months to September 2020 were 7 percent ahead of the comparative prior year.

According to the company’s management, volumes were driven by a strong recovery in the Individual Home Builder (IHB) market, Concrete Plaster Manufacturing (CPM) and Roads segments on the back of strong tobacco and cotton market revenues.

At Turnall, sales volumes for the quarter were 11 percent above comparable period last year and 81 percent above the previous Covid-19 impacted quarter. Cumulative sales volumes for the nine months were 3 percent above the comparable period last year.

This signals that possible economic turnaround is not isolated.

Even beverages giant, Delta Corporation, that last reported lager beer sales growth for the three months to December 2018, finally reported growth during the period under review.

Lager beer sales volume grew by 18 percent in the three months to September 2020 ahead of the comparative prior year.

Consumption for basic household products seems to have done well if numbers released by National Foods and Innscor are anything to go by.

First Quarter to September 2020 volumes at National Foods closed 15 percent higher than the comparative quarter, and showed continued growth against Quarter Four of F2020.

At National Foods, the flour division recorded a 43 percent growth in volumes against the comparative quarter, driven by an improved wheat supply, firmer demand from the pre-pack category and the general adoption of open-market policies.

The stockfeeds division achieved a 26
percent growth in volume versus the comparative quarter while the grocery and snacks divisions both produced strong volume growth of 76 percent for the grocery division and 21 percent for the snacks division.

The maize division, however, recorded a volume decline of 35 percent against the comparative quarter.

Innscor’s Prodairy continued to record excellent growth, with overall volume performance being 24 percent above the comparative quarter and 60 percent above the final quarter of F2020.

Volumes were driven by a continued increase in local raw milk supply and the addition of new and adjacent product lines.

Profeeds, Probrands, as well as Probottlers all recorded volume growth of 10 percent, 18 percent and 35 percent respectively.

Not to be left behind is the media sector, where ZSE-listed Zimpapers is the representative.

The integrated media group managed to side-step economic and Covid-19 challenges to boost volumes.

Positive volume growth of 7 percent and 11 percent was recorded by the Radio Broadcasting Division and the newly established online television station, ZTN, respectively.

The Newspaper Division, however, suffered the most from the effects of Covid-19.

Although there was a 15 percent advertising volume recovery, circulation volume remained depressed, being 33 percent adverse to the same period last year.-ebusinessweekly.clz.w