By Mc Donald Chapalapata, a Contributor
Exchange losses amounting to K6.36 billion incurred by Castel Brewery Malawi Limited has affected profit margins for conglomerate Press Corporation plc which has posted an after tax profit of K19.9 billion, 13% lower than prior year.
In a financial statement for the year ending 31st December 2020 signed by Press Corporation plc Board Chairman Randson Mwadiwa and PCL Group Chief Executive Officer George Partridge, the conglomerate said granted the very difficult operating environment, the Group registered respectable results with profit before tax for the period at MK38.22 billion (2019: MK40.31 billion) was 5% lower than prior year.
“Most Group companies could not meet planned turnover levels and Group revenues were just level with prior year. Profit after tax at K19.90 billion (2019: K22.87 billion) was 13% down on prior year. Results were further negatively impacted by a 90% decline in profit from equity accounted investments largely due to losses incurred in the Beverage and Bottling Company occasioned by an exchange loss amounting to MK6.36 billion (2019: MK258 million),” reads the statement in part.
PCL also said in addition, Directors found it prudent to make a provision, pending resolution, in respect of Value Added Tax claims in the mobile phone company by the Malawi Revenue Authority amounting to MK2.3 billion (2019: MK1.9 billion) following a tax audit. Accordingly, the statement informs, 2019 results were also re-stated to take this provision into account.
“The year was defined by the global Covid-19 pandemic and the attendant preventative measures that severely restricted business and commerce affecting all areas of the economy. Locally, the situation was further exacerbated by the unsettling effects of the pre and post fresh presidential election activities which led to a highly unpredictable economic landscape. As a consequence, economic growth estimated at 0.6% was significantly down when compared with the pre-pandemic estimates of around 5.5%,” reads part of the statement.
PCL also announced that it is divesting in Castel Malawi Limited.
“After assessing the various operational and regulatory issues that continue to negatively affect Castel Malawi Limited, Directors concluded that it would be in the best interest of the Group to divest PCL’s remaining 20% stake in the company. Negotiations to that effect have now been concluded at a price of USD12 million, and the proceeds will be realized in 2021. The investment has been disclosed as held for sale in the financial statements,” reads the statement in part.
PCL also announced new investments in an insurance company and a foreign bank through its subsidiary National Bank of Malawi (NBM) plc.
“During the year, the Group made a 49.5% investment in LifeCo Holdings Limited, a newly formed life insurance, pension administration and asset management business. The company started its operations in January 2021 immediately upon being granted the requisite licenses by the Registrar of Financial Institutions. Similarly, National Bank of Malawi acquired a controlling stake in Akiba Bank, a potentially high growth bank in Tanzania, as part of the Group’s growth strategy in the region,” reads the statement in part.
In segmental performance, PCL said in the financial services segment, NBM plc delivered strong results with a 31% growth in its profit after tax but the telecommunications segment (mobile phone company: TNM, and the fixed telephony and broadband company: MTL) registered 46% decline in its profit after tax.
“In the energy segment (ethanol manufacturing: PressCane and Ethco) delivered excellent results and registered a 116% growth in its profit after tax. The performance was driven by improved margins following the agreement of a new pricing model with the Malawi Energy Regulatory Authority.”
“Results were further bouyed by an upside from the production of hand sanitizers, a new product line, in the wake of COVID-19 pandemic, supported by the availability of additional feedstock carried over from the previous year,” reads the statement in part.
The conglomerate said the Consumer Goods Segment (retail chain: Peoples) continued to make losses mainly due to working capital constraints which is also undermining the implementation of the revised strategic plan.
“The board is considering several strategic options including, but not limited to, inviting new investors into the company,” reads the statement.
PCL said the fish farming business, Maldeco reported a loss while the real estate business, Press Properties registered the same profit as prior year and profit from the equity accounted business namely joint ventures fuel distribution company PUMA Energy and steel processing and trading company Macsteel, associated companies Limbe Leaf Tobacco company Limited, Castel Malawi and a telecom fibre backbone infrastructure company Open Connect Limited declined by 90%.
On the business outlook for this year, PCL says it is confident of delivering planned results.
“With the availability of Covid-19 vaccines, Directors envisage improved economic prospects for 2021. A GDP growth of 3.5% is projected up from the 0.6% achieved in 2020. Management is confident of delivering planned results. The prevailing foreign currency shortages and the related impact on exchange rates, however, remain a major downside risk. Likewise, the significant increase in public debt poses another major challenge to economic growth.”
“The Group continues to search for profitable investment in the power segment. Negotiations for a Power Purchase Agreement are underway. Leveraging on its position in the market, the Group is well positioned for continued growth,” reads the statement in part.