• CAFCA reported a 211% increase in profit after tax to US$1.8 million for the six months to 31 March 2026, with revenue rising 24% to US$22.2 million and overall volumes up 14%
• Demand was driven by Zimbabwe’s construction and infrastructure cycle, with copper volumes up 16%, aluminium volumes up 10%, retail volumes up 37%, and exports rising 109% after the company changed its distribution model
• Operational risks remain material, with 324 production hours lost to voltage fluctuations, smuggled and substandard imported cables pressuring the market, and rising copper, polymer, fuel and freight costs testing margins

Harare- CAFCA Limited, Zimbabwe’s only listed cables manufacturer has reported a 211% increase in profit after tax for the six months ended 31 March 2026, with revenue growing 24% to US$22.2 million from US$17.9 million in the same period of the prior year, driven by volume growth across copper and aluminium cables and higher copper prices in international markets.

The results, represent the most significant half-year profit improvement the Zimbabwe Stock Exchange and Johannesburg Stock Exchange-listed cable manufacturer has reported in the current financial era.

This comes after a period in which CAFCA has been navigating a trading environment shaped by two converging forces pulling in opposite directions. On the positive side, the construction sector has benefited significantly from a combination of favourable macroeconomic conditions including a positive 2024/25 agricultural season, increased diaspora remittances, and the continued rally in gold prices, all of which have increased both corporate and household allocations to infrastructure projects.

On the negative side, rising copper and polymer input costs driven by the global commodity rally and fuel-linked inflationary pressures, power quality challenges that cost the company 324 hours of production during the half, and the persistent infiltration of smuggled and substandard imported cables into the Zimbabwean market are all actively working against the volume and margin momentum the results describe.

CAFCA's revenue and volume performance cannot be fully understood without appreciating the specific character of the demand environment that has driven it. The company's commentary identifies the construction sector as the primary beneficiary of Zimbabwe's current macroeconomic configuration, with both corporate and household players increasing infrastructure project spending. This is not a generic consumer demand story, but  a capital allocation story in which the stability of the ZWG exchange rate, the inflow of diaspora remittances, record tobacco marketing season revenues, and elevated mining sector incomes have collectively created a pool of investable capital at the household and corporate level that is flowing into construction and infrastructure.

For a cable manufacturer whose products are essential inputs for every building, industrial facility, and infrastructure project, this demand environment is structurally favourable in a way that has little to do with CAFCA's own operational decisions. The company is, in important respects, a proxy for the health of Zimbabwe's construction and infrastructure investment cycle in the same way that Delta Corporation is a proxy for household income and consumer spending. When that cycle is strong, as it currently is, CAFCA's volume numbers reflect it directly.

Overall volumes for the six months to 31 March 2026 grew 14% year-on-year, supported by a 16% recovery in copper volumes and 10% in aluminium volumes. Within the sales channel breakdown, the retail segment grew 37%, driven by enhanced channel partner integration and a renewed focus on customer service within factory shops. Commercial volumes remained stable at 2% above the prior year.

The utility segment declined 17% as offtake was limited by liquidity constraints within the sector, with the company noting commitment from utilities to convert the pipeline of back orders into deliveries. Exports improved 109% following the realignment of the distribution model and the removal of the consignment-stock system.

The 109% improvement in export volumes is the most analytically striking number in the sales breakdown, and it requires explanation because its cause is structural rather than purely demand-driven. The company attributes the growth to the realignment of the distribution model and the removal of the consignment-stock system, describing its agility in meeting customer lead times as a competitive advantage in regional markets.

The consignment-stock model, under which CAFCA would hold finished goods at the customer's location with payment only triggered upon sale, is operationally convenient for customers but creates working capital strain for the supplier and obscures actual demand signals. Removing it and replacing it with a direct-order distribution model means that the 109% export volume increase reflects genuine orders placed and fulfilled rather than inventory movements within a consignment arrangement. The shift also improves CAFCA's working capital position and gives the company cleaner visibility into actual regional demand.

The export markets serviced by CAFCA include customers domiciled in Malawi, Rwanda, and Mozambique, which contributed US$1.6 million of the total US$22.2 million revenue in the half, compared to US$1.1 million in the prior period.

While still a relatively modest proportion of total revenue at approximately 7%, the 42% growth in absolute export revenue, combined with the 109% volume growth, suggests that the distribution model change has unlocked regional demand that the consignment system was suppressing.

The profit after tax figure of US$1.8 million against US$0.6 million in the prior period, representing a 211% increase, is the result of operating leverage on a fixed cost base combined with cost optimisation measures implemented in the prior year rather than a single exceptional item. Revenue grew 24% while operating profit grew from US$0.13 million to US$2.6 million, a disproportionate improvement that reflects the operating leverage inherent in a manufacturing business with significant fixed costs.

When revenue grows substantially faster than the fixed cost base, the incremental revenue flows disproportionately to operating profit. CAFCA's manufacturing facility, depreciation charges, and overhead structure are largely fixed regardless of production volume. A 24% revenue increase on that fixed cost base, combined with the cost optimisation measures the company references from the prior year, produced a 211% profit increase by amplifying the marginal revenue contribution of each additional unit sold.

The effective tax rate and the income tax expense of US$0.7 million against profit before tax of US$2.6 million produces a rate of approximately 28.7%, consistent with Zimbabwe's standard corporate tax treatment. Basic earnings per share rose from US$0.0172 to US$0.0539, a 213% increase on the same weighted average share count of 33,949,000, confirming that the profit improvement fully accrued to existing shareholders without dilution.

The board decided not to declare an interim dividend citing cash flow considerations. The company's inventories increased substantially during the period, reflecting both the stocking approach adapted to shifting demand patterns and the strategic accumulation of raw material stock in an environment of supply chain uncertainty.

CAFCA's disclosure that 324 hours of production were lost to voltage fluctuations in the half year, compared to 99 hours in the same period of the prior year, is a significant operational deterioration that the broadly positive financial results obscure. A more than threefold increase in voltage fluctuation-related production losses represents a material and growing drag on manufacturing efficiency.

Unlike outright power outages, which can be managed with backup generation, voltage fluctuations damage equipment, disrupt production processes, and produce quality defects in cable manufacturing that require remediation, creating costs that do not appear cleanly in any single line of the income statement.

The solar plant, which went live in March 2026 and is expected to contribute 30% of CAFCA's power requirements going forward, is a genuine and important infrastructure investment. The US$1 million USD facility financing the solar plant, drawdown at 11% per annum payable over 36 months secured against the solar asset, is appropriately structured for the investment's risk and return profile.

However, the solar plant addresses the volume of power supply rather than its quality. Voltage fluctuations are a grid quality problem arising from the instability of Zimbabwe's electricity distribution infrastructure, not a supply availability problem that solar generation directly resolves. CAFCA's power quality challenge will persist as long as its grid connection quality remains unstable, regardless of how much solar capacity supplements its supply.

This distinction matters because the 324 production hours lost to voltage fluctuations in a single half year represents a quantifiable opportunity cost. At CAFCA's revenue run rate of US$22.2 million for six months, approximately 4,368 production hours per half year assuming continuous operations, each production hour generates approximately US$5,000 in revenue. The 324 hours lost therefore represent approximately US$1.6 million of unrealised revenue in a half year period, equivalent to almost the entire profit after tax for the period. A voltage regulation investment, either through grid-side power conditioning equipment or on-site voltage stabilisation infrastructure, deserves to be evaluated as a capital allocation priority alongside the existing solar project.

Smuggled cables: the market threat the results cannot contain

The company's outlook statement identified the influx of smuggled or otherwise substandard imported cables as a persistent challenge in the operating environment, a disclosure that appears briefly but carries significant strategic weight. CAFCA manufactures cables that meet Zimbabwean and international quality standards, using locally and regionally sourced copper and aluminium to precise specifications. Smuggled cables, typically originating from lower-cost manufacturing environments with different quality standards, enter the Zimbabwean market at prices that undercut formal manufacturers without bearing the regulatory compliance costs, import duties, or quality assurance expenses that CAFCA carries.

The 37% retail volume growth that CAFCA reports suggests the company is successfully competing in the retail channel, but the 17% decline in utility volumes, attributed to liquidity constraints rather than competition, raises a question the trading update does not fully answer: to what extent are the back orders in the utility pipeline being partially filled by alternative, possibly informal, suppliers during the period of delayed formal offtake?

If utilities facing liquidity constraints are sourcing cables from informal channels while their formal orders with CAFCA accumulate as a pipeline, the utility volume recovery when payment capacity improves may be smaller than the existing back order position implies.

The company expresses the hope that the government's ongoing crackdown on smuggling and unfair trade practices will yield positive results if sustained. The conditionality in that framing, if sustained, is an honest acknowledgment that enforcement against cable smuggling has historically been inconsistent and that the improvement the company anticipates depends on policy continuity rather than structural market change.

CAFCA's outlook is described as optimistic, with the company remaining mindful of supply chain instability, power quality, and smuggled cable competition. The optimism is justified by the demand environment. The construction sector activity that has driven the first half performance shows no sign of immediate reversal. The export distribution model change that produced 109% volume growth provides a structural improvement in regional market access that will continue to generate export revenue in subsequent periods. The solar plant contribution of 30% of power requirements from Q2 2026 reduces the company's exposure to grid supply availability, if not quality.

The risks are equally real. Copper prices, which drove a portion of the 24% revenue growth alongside volume, are subject to global commodity market volatility that CAFCA cannot control. The global commodity rally the company references as a positive demand driver is the same dynamic that has increased its raw material costs, and the net effect of copper price movements depends on whether CAFCA can pass input cost increases through to customers faster than those increases erode margins. The working capital management that the company emphasises will be tested by the combination of growing inventory requirements, expanding trade receivables from volume growth, and the absence of dividend-related cash outflows that would otherwise have constrained capital allocation.

The 211% profit increase is the most compelling number in these results. The 324 production hours lost to voltage fluctuations is the most consequential operational disclosure. Together they describe a company performing well in a favourable environment while carrying an infrastructure vulnerability that, if not addressed, will constrain how much of that favourable environment it can convert into sustained financial performance.

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