MedTech profit jumps 1713%
BUSINESS REPORTER
Listed pharmaceutical products supplier, MedTech Holdings Limited’s profit for the year to December 31, 2020 surged by more than 1 700% to ZWL$70.06m from ZWL$3.86m recorded in the prior year due to a dip in net financing costs.
Net financing costs were ZWL$160,922,560 from ZWL$276,952,169 in 2019.
Group revenues increased 12% to ZWL$353m from ZWL$314m.
Volumes, however, decreased by 5% compared to corresponding in prior year.
The group’s board chairperson, Rose Mazula, attributed the slump in volumes to a stance by management to restrict sales due to the continual devaluation of the debtors’ book with aim of preserving shareholder value, decreased consumer spending as income levels have not kept up with rising general price levels and this has caused aggregate demand to remain subdued.
The company also suffered stockouts due to challenges in sourcing replacement stock of raw materials and goods due to stop supply from foreign creditors because of overdue balances and key local suppliers demanding prepayment.
There were also delays in restocking directly resulting from Covid-19 lockdowns.
Mazula said the group suffered a net exchange rate loss of ZWL$160.5m largely due to the translation of monetary liabilities, mainly foreign creditors, during the period.
MedTech operates MedTech Distribution, Smart Retail, Choice Brands, HeyZoom and Chicago Cosmetics, among others.
HeyZoom is an addition to the group and FMCG segment which is an online retail platform which was created to help customers during the lockdown periods.
HeyZoom segment revenue increased by 4% compared to the comparative prior period. Sales volumes decreased 24% as compared to the comparative prior period.
Margins decreased due to reduced real selling prices as well as promotions entered to try and increase sales volumes which had significantly decreased compared to the prior period.
The manufacturing segment comprises of Chicago Cosmetics (Private) Limited with revenues increasing by 18% compared to comparative prior.
There has been a sales volume increase of 6% as compared to the corresponding prior period.
The revenue increase was due to increased product offering and reduced selling prices of key lines to maintain market share against grey market imports.
Margins decreased due to quick stock turn over and reduced selling prices.
The manufacturing segment posted an inflation adjusted profit before tax of $25.9m.
There had been no activity in this segment during years 2020 and 2019 and factors contributing to no trade in this segment include working capital challenges, inadequate inventory and no lines of credit.
The group owes legacy debts amounting to R25.5m to foreign creditors and of the validated debts, R24.3m is yet to be paid while appeals have been lodged for R2.1m.
Mazula said at this stage, the group is unsure when payments will be made in full for the debts validated which owed and when a response would be received for appeals lodged.
Delays in the payment of legacy debts limits the group’s ability to renegotiate foreign credit and this has resulted in cuts in supply and stock outs which is one of the contributing factors to the decreased sales volumes.
