ZAMEFA – Looking East For Value
Finance, ZAMEFA Plc

The electrical cable company has been in transition over the last 6 months. General Cable, its former parent company successfully offloaded 75.4% shares to Reunert International Investments (Mauritius) Limited (listed on the Johannesburg Stock Exchange). According to their Managing Director, Rosetta M Chabala, this was a significant turning point for the company in 2016. She is bullish on the prospects for the company with expectations of growth in the South African market and the much needed product diversification that could see the company go to the next level in terms of customer satisfaction.

Exuberant of her team’s commitment to the transition, Rosetta expressed pride in her team’s ability to navigate the murky macro environment of 2016. Stability in the ZMW meant exchange gains being recorded by the company. However, bearish copper prices and electricity outlook saw many of its local clients pull back on demand for their product. Therefore, Rosetta and her team were left with no choice but to look to East Africa for revenue growth. This sales diversification paid off. 200% growth in sales and leg into the growing East African market over a two year period. Impressive.

With zero debt on their books, their CFO made the most of short term facilities from domicile banks (Stanbic and Barclays Banks) that saw their current liability debt grow by 26.7% in 2016. Overdrafts offered a cheaper source of finance in the 2016 era of austerity. However, over indulgence can stress the ability to liquidate short term facilities as seen by their acid test which scored below 1. Total assets and total liabilities shrunk overall by 7.2% and 9.3% respectively.

Working capital management saw an increase by 43 days in 2016. This may be attributed to seeking geographically distant markets, something that the management team will sternly look at in 2017 when they review their inventory and receivable days. However, their labour component continues to be productive with a 3.4% improvement.

With year-end period tag at September 2016, the company scored 6% and 12% for return on capital employed and return on equity respectively. The EPS was 0.32 and dividend remained constant at K3.792M for a second year in a row.

Sustaining the new found East African market will be Rosetta’s team’s top priority for 2017. In addition, product diversification and searching for new market segments will be the key for value growth. This will be achievable with the goodwill that Reunert brings to the electrical cable company

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