Harare – Zimbabwe Stock Exchange (ZSE)-listed pharmaceuticals manufacturer, MedTech Holdings Limited said it owes significant amounts to foreign creditors resulting in cuts in supply and stock outs which among others led to a decrease in sales volumes during the half year ended 30 June 2019.
MedTech is a diversified group of companies engaged in the manufacturing, marketing and distribution of health, hygiene, beauty, and pharmaceutical products.
In a statement accompanying the half year financials, the Group’s Chairperson Rose Mazula said in line with exchange control directive RU 28 Dated 22 February 2019 and exchange control circular 8 dated 24 July 2019, the Group registered “these” legacy debts through its bankers but are still awaiting approval from the Reserve Bank of Zimbabwe.
Mrs Mazula highlighted that the foreign creditors have been restated to the interbank rate of 6.62 at the end of the reporting period. Currently, the interbank rate is trading above 1:14.
Following the currency reforms by government in June, most companies’ operations have been impacted as the RBZ and banks have delayed settling foreign obligations.
“The restatement of the foreign creditors leaves the Group technically insolvent and in a precarious position,” Mrs Mazula said.
With the country battling through acute foreign currency shortages, the central bank’s capabilities to service the legacy debts seems highly unachievable in the short term thus, a cause for alarm for most companies swimming through the crippling debts.
MedTech reported a mixed set of results during the period under review following the change in functional currency.
The Group’s operating profit increased by 19% to ZWL$2.4 million from ZWL$2.0 million in the corresponding period last year, and revenues increased by 34% from ZWL$6.0 million IN 2018 to ZWL$8.1 million in the period under review.
Meanwhile, the Group reported a deterioration in profit before tax from a profit of ZWL$$952.8 in 2018 to a loss before tax of ZWL$8.0 million in 2019, representing a negative 88% change.
Despite the increase in revenue, Mrs Mazula said that sales had been restricted so as to preserve shareholder value due to the uncertainty in the operating environment with the main factors of rising inflationary pressures and foreign currency constraints being key factors.
“Consumer spending has decreased and aggregate demand has been subdued resulting in significant sales volume decrease of approximately 80% compared to the corresponding prior period,” she said.
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