In a trading update for the three months ended March 2022, RioZim had a poor start to the year which reflected in production declines across its various mines. Gold production at the Cam & Motor Mine fell 34% relative to a year earlier, an outcome RioZim attributed to production suspension to test its new BIOX Plant during the period under review.

The Renco Mine also recorded a subdued performance, with gold production 21% below the previous year’s comparable period, while Dalny Mine had no output at all owing to insurmountable conditions that prevented operations from proceeding.

Diamonds in the rough

At the associate venture RZM Murowa, a 49% decline in diamond production was recorded as a result of low-grade stock pile processing in the period under review.

The long-awaited BIOX Plant was commissioned in April 2022 and is expected to complement gold mining operations at the Cam & Motor Mine. Poor ground conditions and flooding in the Dalny Mine halted production in the period under review, with operations expected to commence in the quarter ending June 2022. Power challenges at the Renco Mine continued, but ongoing infrastructural rehabilitation by the ZETDC is expected to curtail this problem.

Empress Nickel Refinery remains under care and maintenance while expansion efforts continue at the RZM Murowa associate with project commissioning anticipated within this calendar year.

Contrastingly,

In the six-months ended January 2022, Truworths enjoyed sales volume gains and credit facility improvements that spurred loss recoveries and enabled a profitable half-year period.

Overall volumes were up 9.8% from the previous comparable period. With doubtful debt allowance as a percentage of gross debtors down to 12% from 15% a year earlier, credit sales managed a 5.1% improvement to 38.2% of overall sales. Accordingly, cash sales fell 5.1% but still dominated the proportion of overall sales at 61.%.

In response to improved volumes and credit sales, revenue from contracts with customers was up 30% at ZWL252.63 million. Trading expenses however crept 15.73% higher to ZWL201.75 million. With a 225% growth in operating profit to ZWL12.65 million, a loss recovery was recorded from the prior year.

The recovery was largely attributable to a resilient accounts receivable balance, this owing to improved credit sales in the period under review. Accordingly, Truworths made a prior year loss recovery from ZWL11.56 million to ZWL106.62 million.

 
Outlook – Zim economic policy as a double-edged sword

Flooding challenges continue, effectively cutting-out a whole quarter of RioZim’s financial year with no output from Dalny Mine – an unsustainable position to be in given an already high set of production costs stemming from unreliable energy supplies. While exchange rate woes continue,  some respite has emerged in the form of a more favourable benchmark exchange rate for RioZim’s 40% ZWL export proceeds surrendered to the RBZ.

With Truworths, while optimism is welcome, it is refreshing to hear candid opinions from listed firms concerning the state of affairs in their operating environment. Formal market exchange rate overvaluation and variance relative to the prevailing parallel market rates in Zimbabwe continues to undermine cash flows and profitability, but the challenge will somewhat be moderated by recent adoption of a “willing buyer-willing seller” forex benchmark, a right lower than parallel market rates but well above the predominantly stagnant RBZ auction rate.

Looking ahead and given May 2022’s brief commercial bank loan suspension, internal credit sale policy considerations may be considered by Truworths in anticipation of similar cash flow hinderances.