Proplastics records subdued volume performance
Plastic pipes and fittings manufacturer, Proplastics Limited, recorded subdued volume performance for the half year to June 30, 2020 on adverse effects of the COVID 19 induced lockdown.
The group also attributed the performance to the relocation process to the new plant, which became fully functional by end of February.
“Operationally, the first half of the year started on a slow note as the group migrated from the old to the new factory in the first two months of the year. This meant a delay in the resumption of production after the normal annual shutdown in December 2019,” said chairman Gregory Sebborn in a statement accompanying the group’s financial results.
Although production resumed after the successful relocation, the following month saw Zimbabwe effect a lockdown as measures to contain the COVID 19 pandemic, which had a knock on effect on businesses. Proplastics got a special waiver as an essential service provider to operate during the lockdown period but demand slow as some sectors the group services were closed. Addition, consumer spending power was curtailed and as a result, a number of projects were put on hold.
For the period under review, the group recorded a loss for the period of $107,2 million which was primarily a result of a fixed exchange rate applied to foreign currency receipts prior to the introduction of the currency auction system towards the end of June.
Despite the inflationary environment, the cost of sales was adequately contained which resulted in gross profit margins of 52 percent, an improvement from 39 percent during the similar period last year, thanks to operational efficiencies realised from the new modern factory.
Management is upbeat of continued improvement as the group gets back to full production and when the new mixing plant eventually gets commissioned in the second half of the year.
During the period under review, turnover fell 18 percent to $195,5 million compared to $238,4 million in the prior year.
According to Mr Sebborn, the last three months of the period under review saw the group receiving the bulk of its revenue in United States Dollars following the approval by the authorities for consumers to utilise their free funds in settling local transactions.
“This allowed the group to adequately service its foreign-denominated liabilities within a short space of time,” he said.
The statement of financial position remained solid with total assets amounting to $764,3. Borrowings remained at minimal levels with a debt to equity ratio of 1 percent.
Said Sebborn: “This is particularly pleasing as the expenditure on the construction of the new factory is up to date and waiting for the final account.
“With the investment outlay on the new factory now complete, the working capital position has started to improve, moving to 1.6 from 1.3 at the end of 2019.”
Despite the economic volatility, the group management is optimistic demand for its products will firm in the second half of the year underpinned by infrastructural development, mining, agriculture and the borehole drilling segment.
Already, the business has had a strong third quarter, which is normally a springboard for a robust second half performance. The group did not declare a dividend to conserve cash to fund the working capital requirements.-ebusinessweekly.co.zw
