BATA buckles to Zambian economic pressure

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• Zambia posts ZMW0.8 million loss
• Zim exports dip -93%
• Temporary stores add ZMW6.5 million to revenue
• Bata cuts stocks aggressively


Lusaka Stock Exchange-listed shoe manufacturer Bata Shoe Company posted a loss of ZMW 0.8 million (US$48 000) in 2019. This was a 103% decline from the profit position reported in the comparative period (of US$1.5 million) in 2018.


The manufacturer’s revenue remained stable, dipping marginally from ZMW153.8 million in 2018 to ZMW153.2 in 2019. Factored into the revenue performance was an initiative to open temporary stores over the reporting period which yielded instant results adding ZMW 6.5 million in turnover.


Gross profit took an -18% knock coming in at ZMW64 million on weakening economic fundamental in Zambia. The Gross Profit decline, According to the report the Gross Profit was:


“a result of an increase in import costs from the currency devaluation and inability to pass the full cost to the customer.”

This was followed by operating expenses that upped 12% driven mainly by impacts of USD based rentals and commission review in line with the revised minimum wage of 2018.


This is testamentary to a weakening macroeconomic set-up that has made it difficult for businesses to operate under. In 2019, the Kwacha shed more than 21% while annual consumer inflation accelerated to 11.7% from 10.8% in December, the fastest rate of price growth since October of 2016.


Owing to the inflation, consumer demand has significantly come off as the buying power of the consumer has been eroded.

Exports to southern neighbor Zimbabwe plummeted -93% with Zimbabwean counterparts now sourcing locally.

Affecting the Zimbabwean market was the obliteration of the multi-currency regime and the subsequent reintroduction of the Zimbabwean dollar. The Zim dollar has suffered more than the Kwacha losing more than 80% in 2019, compounded by soaring inflation which closed the year at over 500%.


The financials also highlighted stringent cost-containment measures taken by management under harsh operating conditions. Cost control initiatives taken resulted in savings of ZMW 2.8 million despite an overall increase year on year from incremental costs. Furthermore, Bata embarked on an aggressive stock reduction initiative “considering an average cost per pair increase of (+121%) year on year.”


In terms of the firm’s outlook, Company Secretary Carol Mulenga said:
We are once again hopeful that our agricultural and mining sectors will perform well this year and generate positive spin-offs in the retail and wholesale sectors.”

EQUITY AXIS NEWS

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