ZECO continues down the pits of perennial loss

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  • The group recorded a loss of ZWL$7,62 million
  • Total revenue gained 17% from 2019 results to ZWL3,25 million
  • Cost containment strategy failing to yield fruits

Troubled locomotive and rail wagon manufacturer ZECO holdings have continued its trend of losses in the half year ended 30 June 2020 as a result of a tough operating environment and failed cost containment strategies.

Total revenue for the period under review was ZWL$3.25 million in inflation adjusted terms up 17% from the ZWL$2,70 million recorded in the comparative period in 2019.

The group recorded an inflation adjusted loss of ZWL$7,62 million, only worsening marginally from a loss of ZWL$7,41 million recorded in the six months to 30 June 2019.

In a statement accompanying these results, the company attributed this poor performance to tough business environment that weighed down heavy on company operations.

“The inflationary operating environment persisted in the first half of the year and continued driving up the cost of production and eroded profitability,” they reported.

Furthermore, unlike most companies, ZECO is lamenting the foreign currency auction system not being as positive to its productivity.

“Reserve Bank introduced the foreign currency auction system in June which saw the exchange rate move from the fixed 1: $25 to close June at 1: $63.7442. This helped reign in the parallel market rate significantly but prices of materials continued to trade at a premium to this rate.”

Financial analysts at Equity Axis believe that ZECO’s power performance is also mutual exclusive with the poor perfomance of the National Railways of Zimbabwe and a barely functional railway system since the company’s niche is rail products.

“The lack of a functional rail system means that there are no investment that can accrue into the operations of ZECO or other sectors that may feed into its space leading to an insufficient capital base for the company.”

Going forward the company expects the economic environment to remain tough for its operations but is optimistic that the opening of borders that had been closed as a measure to contain the spread of COVID 19 will have a positive bearing on business.

Equity Axis News.

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