Turnall’s sales mix strategy pays dividends
TURNALL Holdings says the shift in its sales mix, favouring high-value and low-tonnage products, significantly boosted revenues for the third quarter of 2024.
The company’s sales revenue experienced a notable six percent increase, reaching US$3,3 million, compared to US$3,1 million during the same period in the previous year.
In terms of profitability, the gross margin for the third quarter rose to 19 percent, up from 16 percent a year earlier.
This improvement in margins is primarily attributed to the strategic shift in the sales mix that has allowed the group to benefit from higher margins associated with its fibre-cement products.
Interestingly, despite the increase in sales revenue, Turnall’s overall sales volumes for the quarter decreased by seven percent, totalling 8,537 tonnes, down from 9,132 tonnes in the comparable quarter of the previous year.
This decline in volume highlights the company’s ability to achieve better earnings even with reduced output, reflecting a successful emphasis on higher-value product offerings.
Looking at cumulative performance for the nine months ending September 30, Turnall reported sales volumes that were five percent higher than the same period last year, showcasing a resilient demand for its products.
Likewise, cumulative sales revenue grew by five percent to US$8.8 million, attributable to the consistent availability of fibre-cement products, enhanced production efficiencies, and stable access to critical raw materials.
During the third quarter, the company produced 9,728 tonnes of fibre-cement and concrete products, marking a robust 14 percent growth compared to the corresponding period last year.
“The revenue growth is attributed to a change in the sales mix which was skewed towards the high value and low tonnage products,” said Turnall Chairman Grenville Hampshire in the third quarter trading update to 30 September 2024.
However, despite these operational gains, Turnall faced rising expenses, which surged by 19 percent.
This increase in expenses has overshadowed improved gross margins, leading to a January-to-date loss for the company.
Even amidst these losses, Turnall has managed to generate positive cash flows from its operational activities compared to the same period in the previous year, a reflection that operational efficiency initiatives are yielding results despite the overall financial challenges.
The company’s operational period has been marked by several challenges, including a difficult economic landscape characterised by liquidity constraints, adverse impacts of the El Niño-induced drought, and pricing inconsistencies stemming from discrepancies between the official and alternative foreign exchange markets.
This was compounded by the prevailing inflation trends, linked to a depreciating parallel market exchange rate, which have compounded these difficulties.
In this context, the Reserve Bank of Zimbabwe (RBZ) implemented a drastic 43 percent devaluation of the local currency to address these pricing distortions.
Turnall interprets this significant economic move as a major shift in Zimbabwe’s economic strategy, predicting substantial implications for both businesses and consumers in the broader market.
Going forward, Turnall indicated that it is actively working on civil infrastructure projects in preparation for the installation of a new sheeting plant in Harare, which is expected to enhance production capabilities, reduce production costs and lead to significant savings, particularly in transportation costs.
The roofing tiles plant is set to increase its capacity through the introduction of additional tile templates in the fourth quarter of 2024.
In the period under review, Turnall made strides in boosting the operational efficiency of the tile plant, with further advancements anticipated upon the arrival of the new templates.
These are part of strategic initiatives aimed at enhancing operational effectiveness and driving future growth.-ebsinessweek
