By Almot Maqolo.
HARARE, Zimbabwe (News of The South) – CAFACA, the country’s largest cable manufacturer, says it has a strategic intent to increase finished goods stock as a hedge against inflation and to ensure the market has ready access to the large range of its product lines.
Zimbabwe was recently classified as a hyperinflation economy for accounting purposes. Then the Public Accountants and Auditors Board issued pronouncement 01/2019 on the application of International Accounting Standards (IAS) 29 ‘Financial reporting in Hyperinflationary’. The pronouncement requires that companies that prepare and present financial statements for financial periods ended on or after July 1, 2019 to apply requirements of IAS 29.
In the year ended September 30, 2019, the company’s revenue increased by 207% to $93.4 million from $30.4 million in the same period last year due to movement in exchange rates which moved from a 1 to 1 exchange rate at the beginning of the year and closed 15 to 1 at the end of the year. However, volumes dropped 24% while in volume terms exports rose 70% and 54% in value terms.
In the inflation adjusted results, the firm’s revenue went up 26% to $173.1 million from $137.64 million previously.
The trading period was characterized by inflationary pressures, weak domestic demand, high interest rates, low capacity utilization, power outages and acute shortages of forex making it difficult for companies in the southern African nation to operate at full throttle.
CAFCA’s pretax profit for the year at $54.1 million increased against the prior year of $5.2 million at a greater rate than the turnover owing to large holdings of finished goods at the old exchange rate and due to costs not increasing as quickly as the exchange rate movement.
“We are carrying 675 tonnes of finished product against a monthly sales model of 140 tonnes,” said the company in a statement accompanying the results on Monday.
Earnings per share has grown by a multiple of 11 from 11.67 cents per share to 124.51 cents per share.
The increase in liabilities represents customer prepayments at the end of the period. Significantly, the company said it has no foreign currency liability.
The company did not declare a dividend as all cash resources and new borrowings will be required to finance working capital due to the effect hyperinflation environment.
The firm, inflation adjusted balance sheet increased from $103.21 million in the previous period to $134.37 million.
In the outlook, the cable manufacturer said, it is well placed to take advantage of any opportunities that may arise in either the local or export market and has adopted adequate mitigating strategies against the hyperinflation and challenging economic environment.
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