Cafca upbeat despite COVID-19 threat

LISTED cable manufacturer Cafca has said its operations are insulated from the impact of the COVID-19 pandemic due to various factors which include high demand for its products, improved export sales and no exposure to foreign currency liabilities.

by Kudzai Kuwaza

Most companies have suffered losses in both revenue and volumes as a result of the COVID-19 pandemic and the resultant national lockdown which began in March this year and remains in force despite the easing of restrictions.

In its financial results for the year ended September 30 2020, Cafca company secretary Caroline Kangara said the company’s management believed that despite the pandemic, the company will continue operating as a going concern “for the foreseeable future”.

Among the reasons she gave for the optimism include the company being free from the exposure to foreign liabilities, the company’s stock cover of five months in finished goods, the securing of loans and overdraft facilities amounting to $137 million and the demand of cables which has remained firm with sales volumes projected to increase from 140 tonnes to 150 tonnes per month in the ensuing financial year.

Kangara said the company managed to slightly improve volumes year-on-year from 1 735 conductor tonnes in 2019 to 1 744 conductor tonnes in 2020.

“COVID-19-related downturn together with dampened local demand was offset by improved export sales in the region. The holding of finished goods stocks and consignment stock arrangements in the region negated logistical and supply side constraints,” she said.

Cafca’s turnover in historical terms improved by 822% which is well ahead of inflation indices. However turnover in inflation-adjusted terms increased by 24% partly due to the slight increase in tonnage but mainly attributed to the sales mix in which there were more copper conductor sales and less sales in aluminium conductors.

The company’s inflation-adjusted revenue during the period was $1,629 billion up from $1,314 billion in the prior period. Cafca’s inflation adjusted operating profit stood at $760,683 million which is up from $582,833 million in the prior period. The company’s inflation-adjusted profit before tax stood at $466,643 million down from $480,195 million in the prior year.

Cafca, however, did not declare a dividend due to the uncertainty around the stability of the current exchange regime and the unknown requirements of future working capital.

The positive bank balance of $82,5 million is being held against auction commitments received, but yet to be made available.

In the outlook, Kangara said, the company had budgeted for an increase in volumes for 2021 which she believes is attainable provided there are no significant changes in the economy or in the regional economies.

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