Business / Companies
Cafca turnover up 14% in 4 months to January
21 Feb 2013 at 11:32hrs | Views
Cafca's four months to January turnover is up 14%, managing director Rob Webster told the AGM this afternoon.
He also said margins for the period are down as they are selling more aluminum than copper and a lot more exports than selling into the local markets.
Webster said the firm will apply a couple of options they have in the local market, mainly recycling copper with utilities and they are going to reverse the trend of chasing turnover at the expense of profit.
"My guess is by the half year we will be down 10-15% on the profit but we should be able to pick it all up by the year end," said Webster.
He noted that exports were up 121% year on year and margins on the export market this time last year in South Africa were down in the 10s; Malawi and Zambia were in the 20s and in the local market they were in the 25-30%.
"So if you drop 5% on the turnover you are looking at a significant amount of profit. It was a strategy; what we should have been doing is trying to achieve the exports on top of the local markets and not to try to fill up the hole in the local market," he said.
Webster further highlighted that the efforts for the rest of the year are to work with the utilities and get the copper recycling working.
He also emphasized that the cash is "tight at the moment so at the end of December we had no borrowings...but we are borrowed at the moment but again we should be out of borrowing in 2 to 3 months time".
He further noted that imports are a threat to Cafca especially on the big contracts where they will be competing with the likes of South Africa that can do business at a discount.
"We are fighting that, we are working closely with the big users of cables, with the mines we are putting in consignment stock and offering them a package in trying to counter the imports," he noted.
"That problem can only get worse if we don't have successful elections. At the moment it is difficult to do business in Zimbabwe and that pretty much gives us a nice little barrier to competition.
Webster also added that if we have a successful election and the country takes off "foreign competition would be a significant problem."
He said it would be a manufacturing industry problem and not just "a cable problem."
"We are going to be working with the authorities to try and see how they want us to play that one because it becomes a national issue and not a Cafca issue," said Webster.
He said there are certain issues they will always maintain regardless of the national policy for instance the batter arrangement with the national power supplier, Zesa.
"This battering with Zesa is a win-win that very few other people have the ability to compete in. We do see the rest of this year being fine: next year, let's see what the elections bring us," he said.
Cafca chairman Piniel Mkushi said the firm certainly desires a successful political movement.
"We are belting up to a situation where the politics have moved in a positive direction for the benefit of all Zimbabweans and this may raise new dynamics as far as the business challenges are concerned.
"That's what the board has to start working on because we do look forward to a politically positive trend in Zimbabwe during the course of the year," he said.
Furthermore, Webster noted that "Cafca's fortunes are going to rely significantly on its strategies but will also bank on on the country's strategy to protect itself."
He said Cafca's competitiveness relies on the resources base around it and the service providers.
"Even if you give me the best machines I will still not be able to compete on an equal footing if I haven't got a stable power supply.
"We are lobbying at the moment. One of the ridiculous positions we find ourselves in is that aluminum cable made in South Africa comes into this country duty-free," he said.
Concerning indeginisation, Webster said; "We have submitted our plan and we are working along that plan and in terms of that plan within the next three or four months we will be compliant in terms of the targets set by them."
PricewaterhouseCoopers were reappointed as auditors and audit fees of $56 100 were approved.
He also said margins for the period are down as they are selling more aluminum than copper and a lot more exports than selling into the local markets.
Webster said the firm will apply a couple of options they have in the local market, mainly recycling copper with utilities and they are going to reverse the trend of chasing turnover at the expense of profit.
"My guess is by the half year we will be down 10-15% on the profit but we should be able to pick it all up by the year end," said Webster.
He noted that exports were up 121% year on year and margins on the export market this time last year in South Africa were down in the 10s; Malawi and Zambia were in the 20s and in the local market they were in the 25-30%.
"So if you drop 5% on the turnover you are looking at a significant amount of profit. It was a strategy; what we should have been doing is trying to achieve the exports on top of the local markets and not to try to fill up the hole in the local market," he said.
Webster further highlighted that the efforts for the rest of the year are to work with the utilities and get the copper recycling working.
He also emphasized that the cash is "tight at the moment so at the end of December we had no borrowings...but we are borrowed at the moment but again we should be out of borrowing in 2 to 3 months time".
He further noted that imports are a threat to Cafca especially on the big contracts where they will be competing with the likes of South Africa that can do business at a discount.
"We are fighting that, we are working closely with the big users of cables, with the mines we are putting in consignment stock and offering them a package in trying to counter the imports," he noted.
"That problem can only get worse if we don't have successful elections. At the moment it is difficult to do business in Zimbabwe and that pretty much gives us a nice little barrier to competition.
Webster also added that if we have a successful election and the country takes off "foreign competition would be a significant problem."
He said it would be a manufacturing industry problem and not just "a cable problem."
"We are going to be working with the authorities to try and see how they want us to play that one because it becomes a national issue and not a Cafca issue," said Webster.
He said there are certain issues they will always maintain regardless of the national policy for instance the batter arrangement with the national power supplier, Zesa.
"This battering with Zesa is a win-win that very few other people have the ability to compete in. We do see the rest of this year being fine: next year, let's see what the elections bring us," he said.
Cafca chairman Piniel Mkushi said the firm certainly desires a successful political movement.
"We are belting up to a situation where the politics have moved in a positive direction for the benefit of all Zimbabweans and this may raise new dynamics as far as the business challenges are concerned.
"That's what the board has to start working on because we do look forward to a politically positive trend in Zimbabwe during the course of the year," he said.
Furthermore, Webster noted that "Cafca's fortunes are going to rely significantly on its strategies but will also bank on on the country's strategy to protect itself."
He said Cafca's competitiveness relies on the resources base around it and the service providers.
"Even if you give me the best machines I will still not be able to compete on an equal footing if I haven't got a stable power supply.
"We are lobbying at the moment. One of the ridiculous positions we find ourselves in is that aluminum cable made in South Africa comes into this country duty-free," he said.
Concerning indeginisation, Webster said; "We have submitted our plan and we are working along that plan and in terms of that plan within the next three or four months we will be compliant in terms of the targets set by them."
PricewaterhouseCoopers were reappointed as auditors and audit fees of $56 100 were approved.
Source - zfn
