LISTED Grocery retailer, OK Zimbabwe Limited, says it still imports 65 percent of all its retail products mostly from South Africa due to depressed capacity utilisation in the domestic market.
In an update to the company's operating environment at the company's analysts briefing on Wednesday last week, chief operating officer, Albert Katsande, said the local manufacturing sector's operating capacity was still low, forcing them to import more than half of their products from South Africa.
"About 65 percent of the products on our shelves are being imported from South Africa. The foreign supply base rema-ins a mix of direct sourcing for bulk agencies and distribution. Focus rema-ins on increasing the direct sourcing going forward," said Katsande.
The Confederation of Zimbabwe Industries (CZI)'s Manufacturing Sector Survey for 2012 showed that the manufacturing sector's capacity utilisation had declined to 44 percent this year, from 57,2 percent last year.
CZI said the country's manufacturing sector req-uired an estimated US$2 billion to operate at full capacity.
OK Zimbabwe's results showed that despite the manufacturing sector's haemorrhage, the retail sector was recovering largely due to cash injections from foreign inv-estors. OK Zimbabwe was boosted by a US$5 million convertible loan facility from Investec Africa Frontier Private Equity Fund.
OK Zimbabwe's revenue generated for the half year to September 30, 2012 grew by 24,6 percent to US$231,1 million, from US$185,6 million during the same period last year. The company declared a US$0,20 dividend for the period.
Profit before tax was US$6,47 million compared to US$5,15 million in the prior year, while profit after tax grew by 25,8 percent to US$4,86 million, from US$26,73 million last year.
OK Zimbabwe chief executive officer, Willard Zireva, said the increase in overheads was partly caused by increases in employee benefits as more employees were engaged to safeguard the two new stores opened in the latter part of the prior financial year as well as in the refurbished branches in order to provide adequate service in the increased facilities.
"Insurance costs also increased significantly because of growth in asset values. Cost incurred in moving products to the branches increased consequent upon greater use of the distribution centre for warehousing and supply of imported products," Zireva said.
During the period under review, the cost of borrowing increased to US$0,40 million up from a negligible amount in the prior period as the convertible loan from Investec and other bank facilities were accessed.
Capital expenditure was US$7,35 million compared to US$6,9 million last year and was mainly in respect of store refurbishments and replacement of plant and equipment.
With disposable incomes remaining low, slowdown in economic activity is expected to continue to the end of the financial year.
OK Zimbabwe said against such a background, it would continue in its endeavours to grow sales with initiatives including the opening of a new store in Victoria Falls this year as well as full utilization of the many modernised outlets with extra facilities.