Utility costs hit General Beltings margins

LIVINGSTONE MARUFU

Margins for listed conveyor belting products manufacturer, General Beltings Holdings Limited fell sharply in the quarter to September 30, 2020, with increases in electricity and water costs weighing down its performance.

ZESA tariff skyrocketed in September after the power utility increased tariffs by more than 100% in one month, making it difficult for local companies to operate in a tight environment which was exacerbated by the Covid-19 induced lockdown which restricted movement of people and raw materials across the country’s borders.

President Emmerson Mnangagwa, however, last week directed ZESA to reduce the power tariff as was first reported by Business Times.

ZESA has heeded the call and has since reduced its tariff.

The trend in falling margins is reflected in several other companies due to a difficult operating environment.

“The rubber division performance is ahead of prior year and plan due to improved factory efficiencies and order book. However, there was a notable increase in local utility costs which impacted negatively on margins,” Patrick Munyanyi, the company’s finance director said.

He said the limited relaxation of Covid-19 lock down measures in the period partially opened the economy with aggregate demand responding accordingly.

The relaxation of lockdown measures and the subsequent opening of most economic sectors improved the performance of the traditional markets for the chemicals division.

The company’s chemicals division out turn for the year will be driven by a favourable product mix and solid logistical support.

However, the resurgence of Covid-19 pandemic is cause for worry as it affects key markets of the chemical’s division.

Going forward, General Beltings said although the overall performance to date is below budget due to the unintended lockdown effects globally and locally, the company forecasts to post improved performance when compared with prior year.

The improved performance at the rubber division is expected to continue on the back of a strong order book and adequate stock cover of raw materials.

General Beltings’ operating divisions were deemed essential under the Covid-19 government directive as it continued its operations in line with the Statutory Instrument guidelines.

The rubber division supplies the mining sector which has been identified by the government as key to the post Covid-19 economic recovery plan.