The Zimbabwean central bank has agreed to take over Zimbabwe dollar (ZWL) 1.2billion in “foreign currency historical or legacy debt” at a rate of 1:1 between the RTGS$ and the US dollar.
The reserve bank will pay Nampak International the amount owed by the Nampak Zimbabwe in quarterly instalments over three years after the three parties reached an agreement over this. After the introduction of the Zimbabwe dollar this week, the unit is trading at an average of around 1:8 against the US dollar.
“An agreement was reached between Nampak Zimbabwe, Nampak International and the Reserve Bank of Zimbabwe,” said Keith Nicholson, company secretary for Nampak Zimbabwe on Friday.
Nampak had started to limit exposure to Zimbabwe risks by limiting further advances. Nampak Zimbabwe said in November 2018 that as a “consequence of the lack of foreign exchange” its South African major shareholder had reviewed and “subsequently limited their support at the commencement of the third quarter, thereby curtailing their escalating exposure” to the country.
Further to the rising forex risk exposure that South African and other international companies with units in Zimbabwe are facing, Zimbabwean-listed firms have also been grappling with compliance with International Financial Reporting Standards following monetary policy changes instituted this year, which have prompted several companies to delay earnings results.
PPC and Tongaat Hulett are among the Zimbabwe-listed units of South African companies that have been impacted by this. PPC delayed its financials over the accounting policy changes in Zimbabwe, while the Zimbabwean Stock Exchange-listed Hippo Valley unit of Tongaat Hulett has also delayed its financials by about a month.
However, Nampak said on Friday that although financials prepared under Zimbabwe’s new monetary policies were not IFRS compliant, the financials consolidated under Nampak International were compliant. “The results as consolidated by Nampak, the holding company listed on the JSE are in full compliance with IFRS,” said Nicholson.
Nampak Zimbabwe has subsequently posted an operating loss of ZWL$30.5m despite a 31percent revenue surge compared to the prior year contrasting period. The operating loss has been attributed to abnormal expenses.
Nicholson also said: “Macro-economic volatility in Zimbabwe presents a major challenge to the company and has resulted in scarcity of forex coupled with rising inflation. It is likely that the present of foreign currency on the inter-bank market will continue to impact the trading environment.”
Nampak raised trading profit by 3percent to R2bn for the full-year to the end of September 2018, translating to a 15percent jump in headline earnings per share.