Cafca targets increased stock, hedge against inflation

Oliver Kazunga, Senior Business Reporter

THE Zimbabwe Stock Exchange-listed cable manufacturer, Cafca Limited says it is focusing on increasing stock levels of finished goods to hedge against inflation and meeting local and export sales requirements.

In a trading update for the quarter and nine months ended 30 June 2020 the company said conductor cable tonnes sold amounted to 393 540 tonnes, reflecting a 27 percent decline during the relative period last year. The decrease in sales volumes in the period under review was largely attributed to the impact of the initial national lockdown that Zimbabwe embarked on following the outbreak of Covid-19 pandemic in March.

“To ensure local and export sales requirements are met and also as a hedge against hyperinflation, Cafca is increasing finished goods stock levels, which are now currently at 806 tonnes against a monthly sales model of 140 tonnes,” it said.

Exports for the nine months to date were 207 tonnes against the prior nine-month period of 143 tonnes, showing an increase of 45 percent.

Meanwhile, Cafca’s export volumes for the first quarter to December 31, 2019, jumped by 69 percent compared to the same quarter in the prior year. The growth in export was attributable to the growth to some successful consignment stock initiatives, but also noting that the company was coming off a low base.

The obtaining economic environment has been challenging for industry resulting in reduced production and sales volumes as disposable incomes continue to decline due to inflationary pressures.

Recently, Zimbabwe suffered poor energy supplies and limited foreign currency making it difficult for businesses to import essential materials as well as meet their foreign obligations.

However, the Reserve Bank of Zimbabwe in June this year introduced the Foreign Exchange Trading Auction System to improve forex availability to manufacturers as they import critical raw materials.

Market watchers have also hinted that local companies need to be innovative and come up with strategies that generate foreign currency.