Proplastics Volumes, Margins In Rebound
The strong growth in both volumes and turnover resulted in better gross profit margins for the quarter; above prior-year levels and translating to positive quarterly earnings performance.
Proplastics chairman, Mr Greg Sebborn, said demand for the group’s products improved significantly in the third quarter, putting considerable pressure on raw materials and product supply.
And as the sales tonnage grew significantly, volumes responded positively from the reduction of 18 percent in the half year period to June to climb 10 percent above the 2020 interim level.
“Segmental contributions from irrigation, mining activities merchants, civils and borehole drillers registered positive growth in the third quarter. Exports grew 75 percent and contributed 7 percent from 4 percent to total revenue in the period under review,” Mr Sebborn said.
Similarly, gross profit margins, in historical figures, improved 63 percent from 47 percent for the half-year weighted average.
Consequently, margins are now above prior-year levels, which the Zimbabwe Stock Exchange-listed piping firm attributed to strong production from the new factory and sales growth.
The growth in sales volumes and turnover supported by outstanding productivity from the new factory permeated through to a strong earnings performance for the quarter.”
Mr Sebborn said the current ratio improved to 1,34 from 0,7 at year-end and the gearing ratio remained perched at 9 percent.
He said foreign creditors closed the year at US$400 000 compared to US$1 million at the end of 2019, with the business benefiting from permission, through SI 185, for locals to settle accounts in both the local and foreign currency.
“It is pleasing to note that the business is now with trading terms as arranged with its foreign suppliers,” he noted.
Mr Sebborn said the trading environment for the first three months was challenging due to tight liquidity, hyperinflation, volatile exchange market and pricing distortions, which put pressures on the cost of production.
“The global impact of the coronavirus has significantly affected the group’s domestic and regional markets resulting in significant interruptions in the supply and value chains. It is, however, pleasing to advise that we have witnessed a positive increase in economic activity in the third quarter of the period as businesses adapt to the new normal,” Mr Sebborn said.
The global supply shortage of PVC feedstock, a derivative of crude oil, due to the closing of facilities due to Covid-19 has resulted in shortages and price increase of both raw materials and finished goods, which is forecast to spill into 2021.
Mr Sebborn said the strong performance in the third quarter had set the tone for the remainder of the year, despite an expected shortage of raw materials due to the Covid-19 pandemic, for which the group has put in place contingency measures to limit the impact to a bare minimum.
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