Metal fabrication company, ZAMEFA, is in the process of concluding its 2020 financial year end results and has signaled to the market that its loss per share will be between 217% to 237% higher than the previous financial year’s results, according to a statement from the company.
“In accordance with the Lusaka Securities Exchange (“LuSE”) Listing Requirements, the Board of Directors of Zamefa (the “Board”) wishes to advise the Shareholders that for the financial year ended 30th September 2020, the basic loss per share (“LPS’) and head line loss per share (“HLPS”) are both expected to be between 217% to 237% higher than those of the prior year for both the Group and for the Company (collectively the “Group”)”, read a statement issued by order of the Board through their appointment company secretary BDO Zambia Limited on 17th November 2020.
Macroeconomic factors and COVID 19 have weighed heavily on the company. “The increased losses are primarily due to the result of the substantial weakening of the kwacha, against the United States dollar (“USD”) of 53% since the Group’s previous financial year-end and the corresponding remeasurement of the company’s USD based liabilities”.
Currency volatility and exposure exacerbated their protracted tax debacle that saw nonpayment of VAT starve the company of much needed working capital lead to usage of dollar savings. “The Group’s vulnerability to the volatility of the kwacha to the USD is a direct result of overdue VAT and duty draw back refunds due from the Zambia Revenue Authority (“ZRA”), which has required the Group to finance its operations through the utilisation of dollar based funding”.
There was light though at the end of the tunnel in the liquidation of a substantial part of the of overdue VAT were paid to the company. “The Board is pleased to advise that a significant portion of the overdue amounts due by the ZRA were collected towards the end of the financial year reducing the balance outstanding at the end of the year to ZMW96 million (2019: ZMW250 million) and reducing the Group’s net USD exposure”.
The aforementioned factors have gravely impacted the company’s profitability. Covid 19 impacted the availability of much needed copper cathodes that form an integral are part of the value chain. “In addition to the negative impact of the exchange rate volatility, the Group’s revenue, and gross profit in the first four months of the year were negatively impacted by the unavailability of copper cathode in Zambia”.
According to the published statement, “the adverse impact of the Covid-19 pandemic during the balance the year on the demand in the Group’s export markets and the associated logistics further contributed to the higher “LPS” and “HLPS”.
The Group expects its results for the financial year ended 30th September 2020 to be released on SENS and published in the local press on or about 20 November 2020.