LISTED plastic pipe manufacturer, Proplastics, narrowed its loss to ZWL$107.2m in the six months to June 30 from a loss of ZWL$135.3m recorded in the same period last year despite a drop in volumes and revenue on factory relocation and Covid-19 effects.
Proplastics migrated to the new factory in the first two months of the year which meant a delay in the resumption of production after the normal annual shutdown in December 2019.
Proplastics board chairman Gregory Sebborn said while the firm obtained special waiver as an essential service provider to operate during the lockdown period, but demand was adversely affected since some sectors of the economy it services were in full lockdown and consumer spending power was curtailed resulting in a number of projects being put on hold.
Turnover for the period was 18% down to ZWL$195.5m from ZWL$238.4m in the prior year.
Volumes retreated by 18% in the period and this was largely as a result of a combination of the relocation process to the new plant and the adverse effects of the Covid-19 induced lockdown.
Sebborn said the weakening of the Zimbabwe dollar and the resultant inflation has put significant pressure on the operational performance of the business.
He said while a financial loss was recorded for the period, cash flows remained robust.
The statement of financial position remained solid with total assets amounting to ZWL$764m.
Sebborn said the group has managed to adequately service its foreign-denominated liabilities within a short space of time after it received 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.
Despite the inflationary environment, the cost of sales was adequately contained. As a result, gross profit margins improved to 52% from 39% compared to similar period last year attributed to operational efficiencies realised from the new factory.
“We expect continued improvement as we get back to full production and when the new mixing plant eventually gets commissioned in the second half of the year.
Due to the inflationary pressures, the lockdown effect and relocation related costs, overheads were up by 23% from prior year levels which resulted in profit before tax of ZWL$26.5m,” Sebborn said.
Borrowings were curtailed with a debt to equity ratio of 1%. “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.
We expect this position to further improve during the remainder of the year,” Sebborn said.
“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.”