Forex shortages hamper Proplastics
TINASHE MAKICHI
Zimbabwe’s leading plastic pipes manufacturer, Proplastics Limited, says the prevailing shortages of foreign currency will in this final quarter of the year negatively impact on its operations, which depends heavily on imported raw materials, Business Times can report.
Zimbabwe is getting negligible inflows of foreign direct investment and has limited access to affordable lines of credit.
Local companies have also complained that Dutch foreign currency auction system was not adequately providing hard currency for the importation of critical raw materials.
Even those that are lucky to access the greenback at the auction system, the Reserve Bank of Zimbabwe (RBZ) is battling to release funds allotted.
The RBZ is taking at least two months to release funds, forcing companies to source the greenback from the parallel market, where premiums are punitive.
Proplastics board chairman Gregory Sebborn said the situation was dire as the company was battling to clear debt arrears, which stood at US$1m at the end of September.
The company has also been battling unstable electricity supply forcing it to rely on standby generators for lengthy periods of production.
“The major challenges in the final quarter of the year will be the supply, cost and the provision of adequate foreign currency for the importation of raw materials combined with instability in the supply of electricity,” Sebborn said.
He, however, said demand for the group’s products remained adding that the company was putting in place plans to ensure adequate supply of raw materials.
In its financial results for the quarter to September 30,2021, Proplastics volumes grew 36% in the period under review compared to prior comparative period.
Sebborn said growth was registered across all segments of the business.
Export volumes also grew by 178% thereby contributing 13% to total volumes.
Driven by the growth in volumes, revenue for the quarter jumped 72% in the reviewed period.
“Although the business experienced a drop in margins due to the ever-increasing cost of raw materials, a strong earnings performance was recorded overall for the quarter,” Sebborn said.
He said capacity utilisation stood at 60% while current ratio improved to 1.6 from 1.4 as at December 31, 2020.
Gearing was 10% at the close of the quarter.
