Published: 2 hours ago

Recent financial results indicate that profit margins across Zimbabwe's listed companies have generally softened, reflecting mounting cost pressures and a challenging policy environment, according to a new report. While top-line growth remains resilient - particularly in consumer-facing sectors supported by higher sales volumes - companies are increasingly under strain from rising taxation, regulatory costs, expenditure on utility alternatives due to poor service delivery, liquidity constraints, and a volatile exchange rate.

IH Securities, in its September 2025 market report, highlighted the contrasting performance of Zimbabwe's equities markets. "In the equities markets, September was a tale of two cities, with the VFEX ALSI (Victoria Falls Stock Exchange All Share Index) sprinting 17,43% month-on-month while on the ZSE (Zimbabwe Stock Exchange), the All-Share grew a muted 0,91%," the firm said.

The report noted that while consumer-facing companies continued to experience volume-driven revenue growth, operating margins were under pressure due to rising costs and the uncertain policy landscape. IH Securities recommended investing in companies with agile management teams and consistent dividend policies as a hedge against market volatility.

The Zimbabwe National Statistics Agency (ZimStat) confirmed these trends in its second quarter 2025 Business Tendency Survey. Overall, 44,1% of respondents across all sectors described the business climate as satisfactory, while 26,4% viewed it as good. Sectoral analysis showed similar sentiments in financial and insurance services (55,5%) and construction (50%).

In terms of financial health, perceptions varied, with only 12,1% of respondents in transportation and storage describing their situation as good, compared to 25% in financial and insurance services. ZimStat noted that negative net balances were recorded across all sectors except financial and insurance.

Capacity utilisation in manufacturing rose slightly to 48,2% in the second quarter, up from 47,7% in the first quarter. Large manufacturers reported a capacity utilisation of 57,3%, while small and medium companies recorded 46,5%. The Manufacturing Confidence Index improved by 3,8 points to 7. About 50% of respondents indicated production levels remained unchanged, while 22,7% observed increases.

In the mining sector, capacity utilisation increased marginally to 56% from 55,4% in the first quarter, with 70,3% of respondents reporting stable production levels. Key constraints for both manufacturing and mining sectors included cash flow difficulties, electricity shortages, and economic uncertainty.

The report underscores the delicate balance companies face between maintaining revenue growth and managing rising operational costs in an unpredictable business environment.
- Newsday