By FRANK MUKUPA
THE depreciation of the Kwacha has boosted Metal Fabricators of Zambia (ZAMEFA) revenue by 10 percent compared to last year.
The Luanshya-based firm however, recorded a 7 percent decrease in volumes and a 9.6 percent reduction in the average copper price.
ZAMEFA benefited because of the depreciation of the Kwacha against the US dollar compared to the prior year. This benefited ZAMEFA as an exporter.
“Operating income for the 2019 year is 64.3 percent higher compared to the prior year as a result of improved efficiencies and the benefit of the depreciation of the kwacha against the US$.
“However, financing costs increased by 35 percent compared to prior period due to increased funding requirements as a result of slow settlement of government and quasi government debt and the impact of translating US$ interest at weaker kwacha exchange rates,” the company said.
The company indicated that net foreign exchange losses for the current financial year, which arise mainly from the re-measurement and group’s net foreign currency denominated liabilities, were lower than last year’s level.
This was due to a smaller downward change in the year-end closing kwacha/USD rate resulting in an overall 7 percent (2018: 27 percent) re-measurement of the foreign denominated liabilities.
”During the Zambian government’s budget presentation on September 27, 2019 various amendments to prevailing legislation were announced. As a result of the amendments, the company and group cash flow will be positively impacted by the zero VAT rating on copper cathode but adversely impacted by amendments to the duty drawback scheme on exports.
“As a direct consequence of these amendments, ZAMEFA has impaired the plant and equipment of the company by K 35 million,” the company said.
According to the company the effective income tax rate was high due to the re-measurement of the Company’s net deferred tax assets to a lower effective tax rate as the official tax rate reduced from 20 percent to 15 percent in the 2019 fiscal year.
“In addition, the company premeasured its deferred tax asset due to the expiry of tax losses in 2020 which based on current forecasts are likely to be unutilized,” the company said.