SEVERAL local companies might be forced to rationalise and restructure their operations this year to survive the current liquidity crunch prevailing in the market.
BY VICTORIA MTOMBA
The latest Zimbabwe Economic Outlook and Stock Picks 2015 by Invictus Securities shows that slowing consumer demand and tight liquidity conditions and weak commodity prices were likely to depress to earnings and valuations.
Invictus Securities Zimbabwe is an independent broker that provides market insight and investment advice for corporate, institutional and private clients.
“We are likely to see further cost rationalisation, restructuring consolidations in 2015 as companies try to survive. “Cost cutting, process optimisation, restructuring and consolidations to dominate as companies seek efficiency to remain profitable,” the report said.
The report shows that capacity utilisation has continued on a decline path and was almost at 2008 levels.
The manufacturing sector took off in 2009 at capacity utilisation level of 10% and reached a high of 57,2% in 2011 and started to decline again from 2013.
The manufacturing sector has been facing working capital shortages, high production costs and power cuts as well as unfair competition from foreigners through the use of multi-currencies.
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The country has witnessed the closure of 4 610 companies between 2011 and 2014 resulting in the loss of over 55 000 jobs countrywide.
The report states that bargain hunting and cherry picking of value stocks as well as corporate transactions type trades will dominate activity on the Zimbabwe Stock Exchange.
Invictus said the economy was likely to remain depressed this year due to poor agricultural season and poor commodity prices.
The agricultural sector has been affected by late rains, late delivery of inputs and inadequate credit for producers.
Tobacco has been affected by the challenges in the agricultural sector and a 5% decline in tobacco earning is expected from $650 million last year.
