By Fidelity Mhlanga
Judging by the few financial results of Zimbabwe Stock Exchange-listed companies that have come to the market so far, the country’s business environment remains subdued with profits declining in the year to December.
CBZ Holdings and BAT Zimbabwe reported a slump in profit with analysts attributing it to the poor economic environment in the country.
MBCA bank, which is obliged to release its financial numbers, recorded a US$5,65 million profit down from the US$5,8 million.
The bank said 44% of its total operating income came from wholesale banking.
The bank’s core capital as at December 31 2016 was US$47,9 million and is on target to meet the regulatory capital level of US$100 million by end of 2020 subject to an improvement in the economic environment.
Treasury operations were impacted negatively by limited export inflows but management sees an upside in foreign currency trades.
“It is, however, noted that there were good opportunities for currency trading, as suppliers of goods started to invoice in the currency denomination of the origin of the goods. This saw the trade transactions horizon widening to include other currencies in the basket,” MD Charity Jinya said in a statement attached to the bank’s financial statement.
“There were also opportunities on Forward Exchange Contracts as customers hedged their positions against volatile global markets. The division performed above budget due to non-interest revenue enhancement initiatives.”
The bank said it may be negatively impacted by increased power shortages, bad road and rail infrastructure, reduced agriculture earnings due to excessive rains, low mining earnings and weak commodity prices.
CBZ Holdings saw its 2016 profit after tax dropping by 32,5% to US$28,3 million from US$35,2 million in 2015 on the back of a decline in net interest income.
Net interest income is the difference between the revenue that is generated from a bank’s assets and the expenses associated with paying out its liabilities.
The bank registered growth of total deposits by 5,5% to US$1,77 billion. Advances declined by 1,4% to US$1 billion from US$1,02 billion.
Cigarette manufacturer BAT Zimbabwe, which in 2015 reported a US$15 million profit, posted a US$8,4 million during the year ended December 2016.
BAT’s MD Clara Mlambo said despite the group’s continuous lead in the cigarette industry, overall sales volumes declined by 21% in 2016 which was due to a drop in purchasing power.
“The industry shrunk. The reason why the industry shrunk last year is that a lot of consumers couldn’t access the money to buy products. There was a strain in the consumer disposals. The consumer has to make a lot of choices with the money they had and all this had an impact in the declining of our volumes,” she said.
Economist John Robertson said the performance of the companies was a result of depressed incomes due to increased job losses experienced in the economy.
“All this is a sign that the economy is not recovering. There is decrease in purchasing power as people do discretionary expenditure by choosing what to buy due to dwindling disposable income,” he said.
BAT’s total revenues were US$34,1 million, a 25% reduction from 2015 mainly due to the decrease in the sales volumes as a result of the economic situation.
Cash generated from operations was US$13,3 million, which is 13% down from US$15,3 million achieved in the year ended December 31 2015.
However, Barclays Bank bucked the trend after registering a growth in its profit from US$3,8 million in 2015 to US$10,8 million in the financial year ended December 2016.
Net interest income grew to US$18,2 million last year from US$16,6 million in 2015.
The bank’s chairperson Antony Mandiwanza said the performance is on course to meet the 2020 minimum core capital level of US$100 million. The total capital adequacy ratio closed the year at 22%, ahead of the regulatory threshold of 12%.
The bank’s non-performing loans ratio closed at 1,6% in 2016.
Robertson said the overall performance by companies was indicative of the tough trading economic environment.
“We continue to experience shrinkage in the economy. This is disparaging investment climate. The Indigenisation policy remains unchanged,” he said.
“This will help resuscitate existing companies, with foreign firms coming to buy into existing companies. This is being discouraged by the indigenisation demands as the policy remains unchanged. Every problem that we identified three or four years back is still with us in terms of ease of doing business. We need to tell investors that they are welcome to invest in the country.”