Blantyre Water Board posts K4.1 billion loss in 2017

Post was last updated: June 4, 2018

The Blantyre Water Board (BWB) continued to report a dismal financial performance, posting a K4.1 billion loss in the year ended June 30 2017, the Ministry of Finance has said.

The development comes at a time another parastatal has posted K6.3 billion in the half-year ended December 2017.

In its 2018 Annual Economic Report released last week, Treasury said the loss was worse than the K3.5 billion recorded in 2015/16.

The report further says in the half-year ended December 31 2017, BWB made a loss after tax of K699 million.

“Though efforts were being made in reducing non-revenue water and debt collection, high electricity bills continue to pose a big challenge to the Board, taking up almost 46 percent of the Board’s monthly operating expenses.

“This affected both profitability and the liquidity position because funds have been largely committed to the settling of electricity bill arrears. To reduce the backlog of electricity bill arrears, the Board agreed with [Electricity Supply Corporation of Malawi] Escom to pay K500 million every week while remaining current on new bills,” reads the report in part.

According to Treasury, non-revenue water was still high although BWB managed to contain it at 37 percent as at December 2017, from 43 percent in June 2017.

The report says BWB has intensified efforts to reduce non-revenue water further by undertaking major pipe replacement, installing ball valves in reservoirs, replacing faulty meters, conducting meter validation, disconnecting illegal connections and activating lost connections.

“The Board’s profitability was still poor as indicated by the operating profit margin which stood at -11.7 percent in June 2017 but improved to 25.9 percent in December 2017. However, the continued negative working capital position of the Board puts the Board at a disadvantage; resulting in lower creditability in banks, as well as creating a poor supplier relationship.

“The liquidity position of BWB continued to be weak and below the desired level of above 2:1. With a liquidity ratio of 0.25:1 as at 31st December 2017 the Board is still unable to cover its current liabilities as they fall due. Furthermore, the debt ratio stood at 106 percent in 2016/17, meaning the Board was still fully financed by debt rather than owner’s equity,” the report says.

Treasury, however, says as at December 31 2017, the position has slightly improved to 96 percent, reflecting efforts taken by the Board to generate more sales, both through the reduction of non-revenue water as well as collection of old arrears to avoid unnecessary provisions and write-offs.

“The Board has a very weak financial leverage position and this is vulnerable to downturns, revealed by its high debt/equity ratio. The Board was still struggling with its receivables management, as the debt receivable days were high at 132 days as at 31st December, 2017.

“This adverse performance was largely a result of non-payment of outstanding bills by both public and private customers. However, the Board has intensified debt collection by conducting periodic mass disconnection campaigns and cleaning up of the customer database through customer verification exercises. As a result, the Board intends to reduce debt receivable days to 73 days by close of the financial year,” Treasury says.

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