By ETimes
Cement maker PPC says it is having difficulty producing group financial results due to inflation accounting in Zimbabwe, and that it would be more prudent to examine the results without including Zimbabwe.
The burden of completing annual accounts in Zimbabwe dollars under inflation accounting is the one issue that both publicly traded enterprises and privately held businesses face.
Because their accounts are not prepared for publication, listed businesses frequently ask the Zimbabwe Stock Exchange for extensions.
“Hyperinflation in Zimbabwe skews the group’s results and analysing the group excluding Zimbabwe is therefore more meaningful,” said the company in a trading update for the six months ended 30 September 2022.
Experts say this is not necessary because our local accounting firms cannot create them.
“But for the international accounting groups, the accounts need to be signed off by the technical departments in South Africa who have little experience of inflation accounting,” said John Legat, chief executive of Imara Asset Management Zimbabwe.
Volumes, a key indicator of demand, for PPC Zimbabwe compared to the first quarter, increased during the second quarter of the current period.
“Despite robust cement demand from residential construction and government-funded infrastructure projects, PPC Zimbabwe’s volumes declined period-on-period by 13% due to the planned kiln shutdown in the first quarter and margins were negatively affected by the use of imported clinker primarily from PPC South Africa and increased maintenance costs,” said PPC.
“The reported numbers are materially impacted by hyperinflation accounting with reported EBITDA declining 48% to R148 million, with margins reducing from 23.2% to 17.3%.”
PPC noticed that there was more foreign currency available in the Zimbabwean economy, and in June 2022, PPC Zimbabwe gave PPC a dividend of US$4.4 million. PPC Zimbabwe had R253 million in hard currency at the end of the current quarter.
PPC Zimbabwe anticipates a recovery for the balance of the financial year – Harare
