BUSINESS REPORTER
Listed plastic pipe manufacturer, Proplastics Limited is optimistic about the future despite the current economic challenges affecting the economy.
Proplastics’ first quarter was marred by serious power cuts, volatile exchange rates, foreign currency shortages, and forex retention challenges.
In a statement accompanying the first quarter trading update, Proplastics chairman Gregory Sebborn (pictured) said power cuts compromised production throughput and efficiencies.
“Despite the drawback of the power challenges, the factory remains capacitated to convert all orders in time as a result of modern investments into the new factory. The business remains alive to any opportunity that may arise in the environment,” he said.
Sebborn said electricity supply remained the biggest challenge for the business going forward.
This led to huge price increases for the products due to the running of production and a high-cost diesel-powered generator.
He said on the economic front, the local currency continued to weaken against all the major currencies as we began the year.
The market continued to show an inclination to settle transactions in US$ as opposed to the use of the local currency.
The business continues to participate in the foreign currency auction or with allocations amounting to US$600,000 having been received for the quarter with US$400,000 already disbursed.
He said authorities’ measures affected business operations.
“Certain fiscal and monetary changes had a bearing on the business, among them the reduction in interest rates to 150% from 200%, a reduction in local USD transactional tax to 2% from 4% as well as the upward review of US$ retention to 85% of locally earned dollars and 75% for export earnings.
“On the downside, the scrapping of the 100% retention of proceeds for corporates who have US$ loans means all funds into the domestic nostro accounts are now subject to retention,” he said.
“In addition, the incremental exports incentive scheme was annulled on February 1, 2023. Before this pronouncement, only export proceeds of up to a certain threshold were liquidated at 40% with any excess qualifying for 100% retention.”
Sales volumes for the quarter grew by 10% compared to the same period last year and revenue remained flat compared to the previous year as our selling price retreated due to a reduction in global prices of major raw materials.
Exports’ contribution was 15% to the total sales revenue, representing a 91% growth compared to the same period last year.
The revenue inflow was mainly skewed towards US$.
Production volumes grew by 10% compared to the previous period despite production interruptions related to power cuts, which also affected the sales product mix.
The raw material supply was consistent throughout the quarter.
In the outlook, demand is expected to improve driven by public and private sector-initiated projects and transactions are likely to continue being skewed towards US$.
The group also expects raw materials availability to remain stable with the opening of world trade after the removal of Covid-19 restrictions and the Ukrainian conflict not having a huge negative impact on supply.
