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Liquidity crunch unsettles Masimba

Zimbabwe’s market is currently experiencing local currency shortages, power cuts, policy inconsistency among other ills.

LISTED construction firm Masimba Holding is boasting of a strong order book with tenures ranging from three to 30 months, but lamented the difficulties in carrying it out due to market liquidity issues among other challenges.

Zimbabwe’s market is currently experiencing local currency shortages, power cuts, policy inconsistency among other ills.

The liquidity crunch is happening despite the central bank releasing physical notes and coins into the market late last month. 

“The group boasts of a firm order book with tenures ranging from three to 30 months.

“However, the execution of this order book may face challenges due to liquidity issues in the market, declining mineral prices, and the impact of El Niño,” the group said in a trading update for the first quarter ended March 31, 2024.

“As a result, the group’s primary focus area will continue to be on cost containment and unlocking value from its strong and firm resource base.”

The operating environment in the period under review remained constrained and challenging.

This was mainly on the back of hyperinflationary pressures driven by the continued volatility and disparities of the foreign exchange rates between the official and alternative market.

The Consumer All Price Index closed March 2024 at 133.39 resulting in a year-on-year inflation of 55,3%.

These challenges were exacerbated by the Zimbabwe dollar liquidity challenges and hence negatively impacting on the cost of doing business.

Notwithstanding the disruptions attributable to the continued unstable economic environment, the group’s turnover was ahead of the comparable period by 25% to US$14,3 million, driven by a strong and firm order book in the roads and earthworks, mining and energy sectors.

The business remained profitable under the review period with a profit after tax of 18% to US$2,6 million from the comparative period.

“The improvement is attributable to cost containment and productivity strategies being implemented across the group,” the firm said.

The group was sufficiently liquid with a current ratio of 1:1.09 due to improved profitability coupled with reduction in the group’s liabilities for the quarter.

The quarry mining business unit, Stemrich Investments, and properties segment, contributed positively towards the group's profitability.

The properties segment is scheduled to commence the selling of its developed land bank before the close of the first half.

In a bid to curb inflation and bring stability to the local currency, the central bank introduced the Zimbabwe Gold structured currency as a replacement for the Zimbabwe dollar.

 The full impact of this new currency is yet to be assessed.

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