Zimbabwe: half-year sales volumes jumped 43 pc

Business journalist

The sales volumes of the listed distribution giant OK Zimbabwe Limited for the six-month period ended September 30, 2021 rebounded 43% from the same period last year, although the group sold under the weight of constraints of Covid-19 and the negative impact of taxes.

OK said the operating environment was less turbulent during the review period than during the comparative period last year, as evidenced by the decline in inflation and the relative stability of rates. exchange rate.

“Nonetheless, the group faced a number of challenges during the period, including spikes in Covid-19 infections, high interest rates, excessive levels of tax on money transfers. intermediaries (IMTT) and limited availability in foreign currencies.

“Covid-19 lockdown restrictions remained in place at varying levels of intensity throughout the period.

Lockdown restrictions impact the business primarily through supply chain disruptions, lower real disposable income for consumers and reduced hours of operation, ”said President Herbert Nkala .

Total revenue increased 42.2% in the interim period to $ 25.2 billion from $ 17.7 billion in the comparative period of the previous year.

The group said its pre-tax profit fell 66% to $ 798 million, from $ 2.4 billion recorded in the same period a year earlier.

Profit for the period fell 76% to $ 365 million, from $ 1.5 billion in the same period a year earlier.

Overhead costs increased 60 percent from the previous year, mainly due to the IMTT – also known as the 2 percent tax – personnel costs, electricity costs, rentals , bank charges, cleaning charges and security charges are the cost lines that have significantly contributed to the growth in overheads.

Mr Nkala said: “While the company has implemented a series of cost containment measures, increases in overhead costs have been driven by exogenous factors such as the adjustment of NEC salaries and the expansion of IMTT thresholds which had a negative impact on the group’s profitability. “

According to the group, the IMTT burden on the business increased 233% to $ 450 million, from $ 135 million in the previous year, due to the increase in the tax cap to $ 800,000 per transaction in the past. during the current fiscal year, against $ 25,000.

The increase in taxes, Mr. Nkala said, has significantly eroded the company’s gross margins.

“In addition, the huge IMTT expense is not tax deductible, which has further increased the company’s tax burden. As a result, the group’s effective tax rate fell from 27.4% the previous year to 39.4% recorded in the first six months of the year.

“We urge the tax authorities to review the structure of this tax in order to reduce its unwanted consequences on formal, tax-compliant businesses,” he said.

Net finance costs increased 299 percent as the group increased borrowing for working capital and capital expenditure.

Total assets edged up 3% to $ 15.6 billion.

Capital spending for the period was $ 1 billion, compared to $ 649 million for the same period a year earlier.

Most of the capital expenditure went to renovating stores. The group continued its store renovation program, with makeovers carried out at OK Masvingo and OK Queensdale during the period under review.

OK declared an interim dividend of 21 cents per share.

Comments are closed.