Firms stay gloomy on outlook with COVID-19 uncertainty, macroeconomic conditions

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Empty streets in Harare amid COVID-19 lockdown

Revenue is likely to be affected by reducing volumes

HARARE – ZSE-listed companies remain pessimistic about the business outlook in the current year amid uncertainty driven by the ongoing coronavirus (COVID-19) pandemic and the persisting macroeconomic challenges characterised by liquidity constraints and policy inconsistencies.

A look into financial reports released by the companies shows that quite a number of them foresee slower business conditions, while others are optimistic amid the stability noticed in the Central Bank’s weekly foreign currency auction system.

Whilst the last quarter of 2020 saw improved business conditions following the relaxation of COVID-19 lockdown conditions, economic activity is once more at a low pace as the county recorded a surge in infections during the festive season prompting the government to tighten restrictions with effect from January 5, 2021. The lockdown has since been extended to the end of February 2021, before another review.

Mashonaland Holdings Limited, a property investment, and development company in Zimbabwe said the economic outlook for the rest of the financial year into 2021 remains uncertain due to the persisting economic conditions which have been exacerbated by the second wave of the COVID19 pandemic.

In its trading update for the first quarter ended 31 December 2020, the company bemoaned that the property market fundamentals have remained depressed due to the difficult macro-economic climate and low business confidence.

Meikles Limited which has investments in agriculture, hotels, and retail sector, also issued a pessimistic outlook amid rising COVID-19 infections which coincided with the beginning of the Group’s fourth quarter, that is the period between January 2021 to 31 March 2021 (Q4 FY 2020).

In its outlook statement contained in the third-quarter trading update, the Group said that whilst main segments are classified as essential services and continue to operate, revenue is likely to be affected by reducing volumes to the end of the financial year and beyond.

The Group, however, expressed optimism following the goods rains received this season which bodes well with the agriculture segment. The Group expects growth in exports during the current year.

“Our dams are full and power, which is essential for irrigation and estate factories will be available not only from traditional sources but also from the solar projects,” said the Group.

Meanwhile, Ariston Holdings Limited, an agricultural enterprise operating in diverse markets that range from tea, macadamia nuts, horticulture and deciduous fruits to fish farming, beef cattle and poultry, said that the impact of the COVID-19 pandemic is expected to continue to have minimal effect on the Group’s performance.

“The Board and management, therefore, believe that the Group’s financial results for the year ending 30 September 2021 will be more favourable than those achieved for the year ended 30 September 2020,” the company said in a trading update for the first quarter ended 31 December 2020.

Over that period, the company recorded an overall increase in sales volumes and revenue performances. The export market remained lucrative, contributing more to revenue.

Hippo Valley Estates Limited also issued a positive outlook saying that notwithstanding the COVID-19 pandemic and the current economic challenges, the Zimbabwe sugar industry is well-positioned to be one of the most competitive in the region.

Nampak also said that the Group is optimistic that it is well positioned to prosper in the 2021 financial year.

“Nampak looks forward to continuing cooperation with Government and all stakeholders towards achieving further much-needed reforms in Zimbabwe’s macro-economic environment,” said the company.

Just as witnessed in 2020 at the height of lockdown restrictions, the current lockdown measures will have a negative bearing on business operations. Companies will likely report depressed sales volume performance and higher costs. A lot depends on the roll-out of the vaccines for economic activities to return to normalcy. On the policy front, the introduction of the forex auction market is a welcome development and with proper frameworks in place, it can go a long way in alleviating foreign currency constraints.

Equity Axis News

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