Metal fabrication company, ZAMEFA, expects to record significantly lower earnings per share when it reports its half-year results, according to a statement from the company.
“In accordance with the Lusaka Securities Exchange (“LuSE”) Listing Requirements, the Board of Directors of Metal Fabricators of Zambia Plc (“the Board”) hereby advises the Shareholders of the Company that the Earnings Per Share for the half-year ended 31 March 2020 is expected to be more than 100% lower than that of the corresponding period last year for the Company”, read a statement issued by ZAMEFA’s company secretary BDO Zambia Limited by order of the Board on 16 June 2020.
A number of listed companies on the Lusaka Securities and Exchange have reported exchange losses that have resulted from the over 30% deterioration in the kwacha against the US dollar. This has an adverse impact on Zamefa which has a capital structure that has dollar facilities. “The drop in EPS for the current year is mainly the result of the substantial weakening of the kwacha, against the United States dollar (“USD”) by 38% since the group and company’s previous financial year-end and the corresponding revaluation of the company’s USD based loans”.
However, the perils of the metal fabricator have been externally influenced. With the tax revenue agency inundated by requests for refunds on VAT, the protracted payback has had devastating implications on the financial performance of the company. “The company’s vulnerability to the volatility of the kwacha to the USD is a direct result of overdue VAT and duty drawback refunds due from the Zambia Revenue Authority, which has required the company to finance its operations through the utilisation of dollar based funding”.
Another issue raised by the company was the shortage of copper cathodes which may have been exacerbated by the threat of care and maintenance of some mines in light lower copper prices and the KCM debacle that saw the exit of Vedanta. “In addition, the revenue and gross profit in the first four months of the year was negatively impacted by the unavailability of copper cathode in Zambia”. However, there is a glimmer of hope as 2020 has seen a rebound in the availability of copper cathodes. “The supply of copper cathode to the company was only restored in the last two months of the half-year”.
The Company expects its results for the six – month period ended 31st March 2020 to be released on SENS and published in the local press on or about 17 June 2020 and has advised shareholders to exercise caution when dealing in the Company’s securities until publication of the results.