Powerspeed Electrical Group Quarterly Results: First Quarter ending 31 December 2019
COMMENTARY
Trading Environment
The continuing economic shrinkage means that all Zimbabweans are becoming poorer and disposable income is declining steadily. This will inevitably mean reduced income for all businesses and individuals and we expect that we will not be an exception.
In general, the trading environment remains extremely difficult, with competitive pressures in a shrinking market reducing margins. Ever increasing regulation of formal business are increasing the cost of doing business in Zimbabwe while making it easier for informal traders, who are now our largest competitors. Laws preventing formal business from accepting US dollar payments are not applicable to informal traders, which allows them to access markets from which we are precluded.
Volume performance and profitability
Volumes across almost all product groups have declined for the reasons given above. This has however been partly offset by significant volume increases in solar products and building materials. The former is due to increased market demand and the latter as a result of our increased activity in this market.
Profitability is very difficult to predict, since as stated above, margins are under significant pressure while expenses are rising in real terms with inflation and a reasonably static exchange rate. The situation is however extremely volatile and a sudden devaluation of the Zimbabwe Dollar could change the picture by short term spikes in profit and dips in expenses. Revenues have increased in both historical and inflation adjusted terms.
Outlook
Both the market and the environment remain extremely volatile which means that our business position is almost completely unpredictable. Having said that, we have always been responsive to changing conditions and we will continue to use the environment to our advantage. In particular, we will continue to focus on balance sheet growth and maintenance of our business infrastructure.
By Order of the Board
M. S. Gurira
20 February 2020
