HomeBusinessIs it a few moments before dawn.?

Is it a few moments before dawn.?

By Admire Mavolwane

AT this moment in time the toughest question one may unfortunately (or otherwise) be called upon to address and probably provide some insight into is: “What does the future hold for the c

ountry?” Or, “Where will Zimbabwe be in two months’ time?”


The same question can be posed across our social and economic endeavours, starting at a macro level and trickling down to micro levels such as firms, schools, churches and even households.


The deeply religious might open the Holy Book, read a few wise words, and perhaps proclaim that “the end is nigh”.


Business people, however, are by their very nature an optimistic lot and would vow that things will come right one day. Politicians would proffer advice through parables or metaphors like “the night is always darkest just before the dawn” and hence, with the future looking very dim indeed, things are about to get better.


The cynics would obviously counter by stating that “we have heard all that before”.


Everyone probably has their own very strong opinion on this vexing question which, understandably at this point in time, cannot be addressed with much conviction.


The country’s back appears to be firmly against the wall and outside or foreign intervention on the economic front has never been more critical. It is heartening that the authorities are at least aware of this fact, to judge from media reports.


No official figures have been put forward as to how much the country is set to borrow from South Africa but the authorities did confirm that they have opened negotiations with their counterparts across the Limpopo River.


It has also been confirmed that the IMF decision on Zimbabwe has been postponed to September 9 – some say this stay of execution is at the behest of South Africa. Investors appear to have already taken a position on the loan, the consequences of accessing, or losing it, and even on the fiscal policy review which has been postponed twice already.


The minister responsible has justifiably been busy shuttling between Harare and Pretoria.


The four-day sojourn obviously allowed investors to take stock, weigh the pros and cons and decide on the best route. Clearly, the consensus was to seize the bull by its sharp horns because after the holidays, the market took off from where it had tentatively left off but with even more zest.


This Wednesday, the industrial index shrugged off the vacation blues gaining 3,24% to reach a new all-time high of 4 257 771,58 points. All indications are that the bulls are unstoppable with the onset of the reporting season and release of the July inflation figure likely to be the tonic needed to start a stampede.


However, judging by the results released so far, the former could prove to be a hindrance rather than a catalyst.


Dairibord (DZL) threw down the gauntlet, releasing six months to June 30 results on July 29 followed last Wednesday by Interfresh whose interim numbers were unveiled to the market through the customary analysts’ briefing.


Starting with DZL; turnover increased by 203% to $470,5 billion spurred on by significant sales volumes growth across most of the product lines.


Operating margins however succumbed to inflationary and possibly political pressures, declining from 18 to 15% with this compression attributed to price controls on milk products and inflationary increases in costs. Operating profits thus grew by a watered down 140% to $68,4 billion.


The 40%-owned associate ME Charhon contributed $10,6 billion to the bottom line, compared with $3,1 billion in the prior period whilst interest inflows of $9,8 billion were recorded, a noteworthy recovery from the finance charges of $3,4 billion in 2004.


Attributable earnings of $58,7 billion were realised showing an increase of 218% on the $18,5 billion achieved in the same period last year.


The group remains in a healthy cash position closing the period with a bounty $47,6 billion after paying off $23,3 billion to the shareholders as a dividend and utilising a further $20 billion to fund the purchase of shares donated to the Employee Share Trust.


As has become the norm, the board did not commit itself as to what the company will deliver for its shareholders in the second six months. It did, however, express its confidence that the group is well-geared to face up to the current economic challenges and will continue to produce satisfactory performance.


Interfresh’s interim results, whilst showing a rather solid performance, were presented by the new regime in such a sombre tone that they left many downbeat. Although not different from the previous set of results, where history will confirm that the company has never outperformed market expectations, the vitality and panache of the previous CEO, Evan Christophides, somehow induced a sense of hope and optimism in the group’s future.


Turnover for the six months was up 134% to $185 billion, driven mainly by local sales which grew by 170% whilst exports increased marginally by 39% amid viability concerns in the export markets.


Poor quality citrus fruit coming from outgrowers which had to be diverted to the juicing factory – obviously the country is now paying the price of the 2000 adventures -also affected the quantity of citrus exported. This combined with weak international prices on the flower side of the business contributed to the lukewarm top line performance.


Reduced export revenues coupled with high local inflation saw margins yielding four percentage points to 10%.


The firming of the US dollar against the euro also affected margins as the revenues from flowers are in euros whilst freight and logistics are charged in American dollars. Consequently, operating profits increased by only 80% on the previous period to $19,7 billion.


Attributable earnings of $12,8 billion were realised, up 133% on the first six months of 2004.


Whilst the new exchange rate of $17,500 to the US dollar will go a long way in improving the viability of exports, it will not be too long before local inflation catches up, unless regular reviews are effected.


The announced impending closure of the Smithfield hypericum venture and Citrifresh Exports cast a dark pall over the future of the group, especially as these ventures are no more than two years old and, according to previous management, held a lot of promise. Furthermore, the decommissioning costs were not available and could be a surprise hit to the income statement come year-end.


In similar vein to DZL, the board of Interfresh gave a non-committal outlook, which serves to underline our assertion that the future, be it in business, political or social circles, is now even more unpredictable than what we had previously become accustomed to. Understandably, those entrusted with the preservation and enhancement of shareholders’ wealth are not willing to put their heads on the block and promise superior returns come year-end.

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