HARARE, December 9, (The Source) – Electrical goods manufacturer Powerspeed, which reported a 45 percent decline in profit after tax in the full year to September from $780,000 to $454,000 weighed down by an increase in costs, says the import restrictions imposed by the government in June were hurting the economy.
Revenue for the year grew 3,7 percent to $41,6 million on the back of growth in market share across all product categories.
Company chair Simbarashe Makoni said government’s June 20 ban on imports had negatively impacted the business.
“We have also been negatively affected by SI 64/2016, which restricts the import of a large range of items into the country. This restriction affects many products not made in Zimbabwe, as well as those that are.”
“While these restrictions may have benefitted some local manufacturers, the net result to the consumer is increased cost, reduced availability and reduced choice. We strongly believe that the costs of these restrictions far outweigh the benefits.”
Makoni said a survey by industrial body, Confederation of Zimbabwe Industries, found that only 20.7 percent of the 250 polled businesses have a favourable view of the government’s protectionist interventions.
Makoni added that difficulties in effecting transfers to foreign creditors timeously, had reduced the company’s ability to take advantage of offshore credit lines.
Earnings before interest and tax (EBIT) declined by 24 percent from $1,86 million to $1,42 million.
Gross margin declined marginally from $12,01 million to $11,95 million, due to competitive pressures.
Finance costs for the year rose by eight percent from $799,000 to $861,000 translating to a profit before tax of $559,000 from the $1,07 million reported in the same period last year.
Profit after tax decreased by 45 percent from $780,000 to $454,000.
During the year, the group invested $1,2 million in the construction of a new branch.
“The funding of this project to completion is still to be finalised, but this purchase was the most significant item, causing an increase in borrowings from $6,1 million to $7,1 million”, said Makoni.
The group’s strategy to expand had driven costs up, without a corresponding increase in income, he added.
“Our ongoing response to the general decline in disposable incomes is to broaden the customer base and continue to increase the range of products on offer, particularly plumbing, paint, automotive parts and building materials,” he said.