…Banks on new projects
LIVINGSTONE MARUFU
Listed engineering firm Zeco has reported a negative working capital as its current liabilities exceeded current assets by ZWL$6.6m during the 12 months to December 31, 2021, creating a material uncertainty over the company’s ability to meet short term obligations, Business Times can report.
Working capital is an important element of any organisation, which measures the overall health and liquidity of a company.
The group’s current assets at ZWL$1.7m in the reviewed period is less than current liabilities of ZWL$8.3m, meaning Zeco will find it difficult to discharge its debts as they fall due in the normal course of business. It also means that Zeco will also find it difficult to cover the costs of day to day trading with cash generated by the business.
The company also reported negative cash flows of ZWL$116 549.
As part of efforts to deal with the crisis, Zeco has stopped giving management allowances and no longer have permanent employees, meaning that all employees are now on contract basis.
Exacerbating the situation was that Covid-19 induced lockdown curtailed business activities in the reviewed period resulting in no major projects being undertaken during the period under review.
The virus forced companies to scale down operations. Inflationary pressures also exacerbated the situation.
Consequently, revenues for the group plummeted 67.4% to ZWL$6.5m in the year 2020 from ZWL$20m in the previous year.
Profit for Zeco, which operates Delward Engineering and Crittall Hope, plummeted 98% to ZWL$23.5m in the period under review from ZW$1.13bn reported in the prior year.
In fact, the group reported a loss of ZWL$5.5m before a monetary gain of ZWL$29m realised in the reviewed period.
The group’s balance sheet also shrunk during the reviewed period. Total assets stood at ZW$1.04bn from ZWL$1.3bn in 2019.
Zeco board chairman, Ben Rafemoyo, is now banking on new projects for recovery.
“The operating environment and macro-economic conditions remain subdued with uncertainty due to the Covid-19 and envisaged new waves of the pandemic. However, positive moves are happening in the industry as new projects are being resuscitated thus positively impacting demand for our products,” Rafemoyo said.
Zeco’s Bulawayo based subsidiary, Delward Engineering, which relies on infrastructure projects for its core business activities, undertook no major projects during the reviewed period.
Another subsidiary, Crittall Hope, which operates in the construction sector, also experienced subdued performance owing to Covid-19 induced lockdowns and suspension of most construction projects.
Rafemoyo said the relaxation of lockdown measures are expected to help in the reopening and resuscitation of projects.
Rafemoyo said the group will be looking for new strategies to enhance the performance of the troubled company.
Zeco Holdings builds rail wagons and locomotives through its subsidiaries for utilities in Zambia, Tanzania, Mozambique, Ethiopia and Kenya.
The company also manufactures roller shutters, electronic garage doors, steel windows and door frames, burglar bars, filing cabinets, and agricultural implements for the Zimbabwean building and construction sector and export to countries in sub-Saharan Africa.
