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SEVERAL companies listed on the Zimbabwe Stock Exchange (ZSE) failed to declare dividends in the year ended December 31, 2016 citing a difficult operating environment, which they blamed for eroding their earnings.
Most companies said the macro-economic environment remained subdued in 2016 inducing a strain on their operations, which negatively affected revenues and profitability.
Financial reports for the period indicate the economy generally did not perform well last year evidenced by a decelerated Growth Domestic Product (GDP) from 1.1 percent in 2015 to 0.6 percent in 2016.
Company executives concurred the economy was weighed down largely by depressed agriculture output, which forced the country to import food and key industrial raw materials, foreign currency shortages and deflationary pressures.
Cash shortages and delays in salary payment persisted during the year, with negative impact on consumer disposable incomes and buying patterns, Dairibord chairman Dr Leonard Tsumba said.
Ailing parastatal Hwange Colliery Company Limited (HCCL) could not declare a dividend during the period after board chair Mr Winston Chitando reported $89 million loss. The company is saddled with debts exceeding $200 million to different creditors and suffers lack of working capital.
Dawn Properties Limited said it could not declare a dividend in view of the need to invest funds into a number of capital projects. “The board has resolved not to declare dividend for the period ended December 31, 2016,” it said.
A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to its shareholders usually in cash payments or as shares of stock or other property.
In its latest report Meikles Limited, which reported delayed results for the year March 31, 2016, could not declare a dividend after recording a loss of $19 million with group chairman, Mr John Moxon citing suppressed business.
In the six month period to September 30, 2016 Meikles’ earnings also remained flat with a loss of $1.5 million.
“The operating environment was characterised by a number of impediments, the main one being cash shortages and delays in settlement of obligations to foreign suppliers. As a result, group turnover for the six months period to September 30, 2016 was static relative to the previous period,” said Mr Moxon.
The country’s largest media group, Zimbabwe Newspapers (1980) Limited, shelved dividend payment stressing the need to preserve cash and service legacy statutory obligations.
Retail clothing giant Edgars Stores Limited did the same citing the high level of borrowings and challenges in stock movement. Edgars’ profit dropped by about 86 percent from $3.9 million to $548 000 during the 52 weeks period to January 8, 2017. Its total revenue also dropped to $52,1 million from 463,9 million.
First Mutual Holdings Limited, Unifreight Africa limited and Dairibord Zimbabwe Limited were also among the league of firms with stagnant and negative growth.
The banking sector, however, tops the list of profitable listed businesses having closed year 2016 with $181 million profits, recording a 42 percent increase from $127 million in 2015, according to the Reserve Bank of Zimbabwe. Released financial reports indicate banks such as FBC, CABS and Agribank made huge profits in 2016. MetBank, which was previously limping, also made significant inroads with 154 percent profit growth of $0.66 million from the previous year. Old Mutual Zimbabwe also remained on the positive trajectory while cement maker Larfarge Zimbabwe scooped $3.1 million profit from $1.9 million loss in 2015. Food processing firms such as National Foods, Innscor, Colcom and Simbisa registered positive growth and declared dividends.