• General Beltings’ profit after tax fell 63.2% to US$29,727 in HY26 as working capital constraints restricted production
• Group volumes fell 5% to 420 tonnes, with cheaper imports and lower pricing reducing the gross margin to 32% from 40%
• Cash fell to US$62,758 as the company financed higher receivables and inventories, leaving access to raw materials

Harare - General Beltings Holdings, a manufacturer and distributor of conveyor beltings, rubber and chemical products, has seen profit after tax fall 63.2% to US$29,727 in the six months to June 2026 from US$80,852 in the comparable period, after working capital constraints restricted production, cheaper imports pressured pricing and gross profit fell 26.4% to US$657,846.

The decline in earnings developed through the company's production cycle. Group volumes fell 5% to 420 tonnes from 438 tonnes, revenue declined 8.4% to US$2.05 million from US$2.24 million and gross profit fell by US$235,701. Operating expenses were reduced by 14.4% to US$657,729, limiting the decline in operating profit to US$53,246 from US$148,664.

Working capital became the main constraint on General Beltings' ability to serve demand. Following Zimbabwe's credit risk downgrade during the first quarter, key raw material suppliers reduced the credit available to the company and moved to upfront cash payments. General Beltings said the change resulted in uneconomic factory throughput and restricted its ability to convert its order book into production.

The problem sits at the point where an industrial manufacturer needs cash before it receives cash from customers. Raw materials have to be purchased, processed and converted into finished products before sales proceeds return to the business. A shortening of supplier credit increases the amount of cash required to sustain the same production cycle and can reduce factory utilisation when that cash is unavailable.

The financial statements show the effect in the working capital accounts. Trade and other receivables increased to US$1.17 million from US$1.02 million at December, inventory increased to US$474,788 from US$429,814 and cash fell to US$62,758 from US$290,290. Operating activities consumed US$188,337 during the first half.

The cash requirement is occurring alongside a relatively small manufacturing asset base. Property, plant and equipment stood at US$3.90 million at June, broadly unchanged from December, with US$79,841 spent on equipment during the period. The immediate capacity constraint is consequently centred on financing the production cycle and securing inputs, rather than a large new manufacturing investment programme.

General Beltings has still been able to grow activity in its core belting business. General Beltings volumes increased 10% to 199 tonnes from 181 tonnes as the company matched competitor pricing in niche markets. Cernol Chemicals volumes fell 14% to 221 tonnes from 257 tonnes after a slow first quarter, leaving total group volumes 5% lower.

Pricing has absorbed part of the competitive pressure. Turnover fell 9% despite the 5% reduction in total volumes, with the company lowering recoveries per metric tonne to remain competitive against cheaper imports. Gross profit consequently declined to US$657,846 from US$893,547, taking the gross margin to about 32% from 40%.

The import pressure has a direct cost implication for the local manufacturing model. General Beltings said higher power, labour and utility costs have raised the cost of producing locally manufactured goods, creating a pricing environment in which cheaper imports have gained preference. Import agents also operate with shorter working capital cycles, giving them greater flexibility in a market where manufacturers are carrying stock and financing costs.

General Beltings has responded by widening its product range. The company has increased its focus on other moulded rubber products serving mining and agriculture, where demand has been rising. That gives the manufacturing operation additional applications for its production capability and connects the business to Zimbabwe's expanding mining and agricultural activity.

Cernol Chemicals is pursuing demand in different markets. The company reported improving activity in the dairy and tourism sectors, with the second half expected to benefit from seasonal demand and continued growth in dairy. Mining activity also provides a demand channel for the wider group's products.

The order book is consequently important because General Beltings has demand that can support higher production. The financial constraint is the cash required to purchase the inputs needed to fulfil those orders. Management's second half plan is centred on securing sufficient raw materials, strengthening revenue from confirmed mining orders, improving production efficiency and obtaining external working capital facilities.

The company has already secured one financing mechanism for this purpose. General Beltings obtained a US$50,000 order financing facility from Stanbic Bank for raw material procurement against confirmed customer orders and had drawn US$50,000 by June, with US$43,000 outstanding after US$7,000 of repayments.

The facility changes the production equation at the margin because financing is linked directly to confirmed orders. Its scale also shows the tightness of the current liquidity position. Against US$1.17 million of trade and other receivables, US$474,788 of inventory and US$62,758 of cash, the company had current liabilities exceeding current assets by US$136,251 at June.

The liquidity position has also affected capital distribution. The board decided on 28 September not to declare an interim dividend and to retain resources for working capital and product demand.

The financial pressure has already reached the point where production, sales and cash generation are closely connected. More orders require more raw materials. More raw materials require financing. Production has to be completed at a price that preserves sufficient gross margin to rebuild cash and finance the next production cycle.

That mechanism explains the deterioration in earnings more clearly than the profit decline alone. The company still has access to mining, agricultural, dairy and tourism demand, and its General Beltings division increased volumes during the period. The constraint sits in the ability to finance and execute production at commercially viable margins.

The second half will place greater weight on the relationship between the order book and available working capital. Sufficient raw material financing would allow General Beltings to increase factory throughput and capture confirmed demand. Higher throughput would need to generate enough gross profit to rebuild the liquidity position, support supplier payments and sustain the production cycle.

The business enters that period with a materially thinner cash position and a financing facility tied to customer orders. The decision to retain cash inside the company, the focus on confirmed mining orders and the expansion into higher demand rubber products all place working capital at the centre of the recovery.

General Beltings' profit decline is consequently tied to a financing constraint inside the manufacturing cycle. The company's installed production base and market opportunities remain in place, but the ability to turn those opportunities into revenue depends on access to raw materials, supplier credit and external working capital at a time when cheaper imports are also limiting the prices that local manufacturers can charge.

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