CONSTRUCTION firm Masimba Holdings Limited (Masimba) has warned shareholders that the El Niño-induced drought and declining commodity prices could hit its order book which is currently valued at US$248 million.
Zimbabwe is experiencing the effects of El Niño-induced drought while declining international commodity prices, except for gold, is threatening forex earnings.
“The group has a firm order book valued at US$248 million with tenures of between three months to three years,” Masimba chairman Gregory Sebborn said in the firm’s annual report for the year ended December 31, 2023.
“However, the execution of this order book may be negatively impacted by the effects of the El Niño weather phenomenon and the declining mineral prices.
“These factors could lead to the government prioritising food relief over infrastructure development, and may result in capital expenditure budget cuts in the private sector. Due to the above, the group’s key focus area will be cost containment and unlocking value from its land bank.”
Such cuts would negatively affect Masimba, as the reduction would harm the construction firm's ability to continue being paid for its public sector projects.
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Sebborn said the contracting business commenced the financial period with a solid order book consisting of roads and earthworks, water, housing, mining, and energy infrastructure projects.
“The order book remained fairly balanced between the public and private sectors for the period under review. We applaud the government and the private sector’s continued investment in infrastructure development, being the key enabler to economic development,” Sebborn said.
“Performance in the property portfolio was firm, and the business unit contributed positively to the group’s performance. Occupancy of properties remained at 100%. The quarry mining business unit, Stemrich Investments (Private) Limited, contributed positively towards the group’s profitability.”
He said that the segment manufactured stone aggregates which were key in the contracting business.
Revenues for the year under review were at US$53,8 million, a growth of 8% from the comparative period as a result of a strong and firm order book at the beginning of the year.
“However, growth declined in the fourth quarter as a conservative approach was taken by the group to align work execution in line with clients’ payment patterns,” Sebborn said.
Profit after tax declined by nearly 40% to US$7,55 million during the period under review, owing to significant declines in fair value gains and other operating income.
Further, the group faced an increase in administrative expenses of nearly 8,5%.
Capital expenditure for the year under review amounted to US$4,16 million, from a 2022 comparative of US$4,81 million.
“The decline of the current ratio to 1.01 was attributable to a strategic decision to purchase property, plant and equipment with short term facilities in order to capacitate the execution of long-term projects,” Sebborn said.
“Based on the forecast cashflows, this position should improve in the second half of the 2024 financial year.”
Total assets of the group improved to US$85,8 million during the period under review, up nearly 36% from the 2022 comparative owing to growth in contracts in progress and contracts receivables.