Zamefa has posted losses of over K72 million in its financial year ending September 30, 2019, mainly triggered by huge finance costs brought about by government’s slow settlement of VAT refunds owed to the company.
According to a statement of profit or loss and other comprehensive income for the financial year ending September 30, Zamefa, the metal fabricators, incurred losses of K72.3 million, induced by increased finance costs brought about by government’s slow settlement of VAT refunds owed to the company, among other operational challenges.
Zamefa incurred increased net finance costs of K36.8 million in the period ending September 30 compared to K27.2 million incurred in the previous corresponding period last year.
The company sustained a second successive loss for the period under review of K72.3 million from around K72.4 million in the prior corresponding period in 2018.
“Operating income for the 2019 year is 64.3 per cent higher compared to the prior year as a result of improved efficiencies and the benefit of the depreciation of the ZMW against the US$. However, financing costs increased by 35 per cent compared to prior period due to increased funding requirements as a result of slow settlement of government and quasi-government debt and the impact of translating US$ interest at weaker ZMW exchange rates,” Zamefa stated in its results released via sponsoring broker, Stockbrokers Zambia Limited.
The LuSE-listed company added that it continued to operate at below normal levels during the period under review owing to government’s slow settlement of its outstanding VAT refunds.
“The company continued to operate at below normal levels of operating activity. This level of operating activity is primarily due to the ongoing slow settlement of duty draw back claims and VAT refunds by the Zambia Revenue Authority (ZRA) as well as the slow payments for product by Zesco and the Rural Electrification Authority (REA). These slow settlements have resulted in the group substantially increasing its borrowings to near its credit limits, forcing the group to curtail its operations to remain within its available levels of credit,” disclosed Zamefa.
“During the Zambian government’s budget presentation on 27 September 2019, various amendments to prevailing legislation were announced. As a result of the amendments, the company and group cash flow will be positively impacted by the zero VAT rating on copper cathode, but adversely impacted by amendments to the duty drawback scheme on exports. As a direct consequence of these amendments, Zamefa has impaired the plant and equipment of the company by ZMW 35 million. The zero VAT rating on copper cathode mentioned above should ensure that the continuing build-up of arrears VAT refunds due by the State should now stop and the expectation is that the State will urgently settle its overdue refunds.”