Harare – Zimbabwe’s leading plastic pipe manufacturer, Proplastics recorded a 25% slump in sales volumes in the five months period to 31 May 2019 compared to the same period last year as demand remained hugely depressed for the period.
This reflects differently to the company’s 2018 full year performance where revenue growth was pushed by an increase in sales volumes.
The decrease in demand started to be felt largely in the last quarter of 2018 financial year due to economic stability.
In a trading update to shareholders and analysts at an AGM held in the capital today, chief executive Kudakwashe Chigiya said all sectors were affected except borehole drillers which grew by 195% in volumes compared to prior year as demand in that sector surged.
Chigiya noted that the fiscal and monetary policies being implemented are constantly and significantly changing the trading environment.
Between the period October 2018 to date, the treasury and the central bank have implemented a number of policies including the introduction of the 2% transaction tax, creation of nostro accounts, devaluation of bond notes and coins, and electronic balances into RTGS$, the introduction of the interbank foreign currency market and the recent scrapping of foreign currencies and the establishment of local currency as the sole legal tender.
“Resultantly, the trading environment from October 2018 remained challenging as the value of the RTGS continued to be assaulted coupled with hyperinflation,” Chigiya said.
“Demand remained hugely depressed for the period.”
The on-going power cuts also took a huge chunk on the company’s performance causing challenges in the supply of utilities as well as the foreign currency shortages which have continued to affect price stability.
“The non-availability of foreign currency on the interbank market and the volatility of the parallel rate continue to hinder price stability,” Chigiya said.
He said the company has been using a 2 tier pricing system with RTGS prices being aligned to inflationary changes.
During the period, the company recorded an improvement in direct USD sales at the expense of the RTGS.
“At the beginning of the year, direct USD sales were contributing 15% to converted total sales,” Mr Chigiya said.
“This has since shifted to +60% before the SI142.”
Despite the subdued operating environment, the company remained buoyant on expansion having managed to open a new branch in Gweru which is expected to contribute 5% in global revenue and is closer to opening the flagship Harare plant.
Financial performance in RTGS$ has been reported ahead of prior year for both turnover and bottom line due to inflationary pressures.
Mr Chigiya expressed caution over the numbers but delighted on the performance in US dollar terms.
“It is encouraging though that in USD terms profitability for the 5 months is on budget and some 60% above prior year,” he said.
Going forward, the company is prioritising an aggressive export strategy now that the country has a local currency, balance sheet preservation, smart partnership with all stakeholders as well as business diversification.
Equity Axis News
Raynold Mhotseka is a Journalism and Media Studies student at the University of Zimbabwe. He serves as a news writer at financial research firm, Equity Axis where he is currently on attachment. He can be contacted through the following email links, firstname.lastname@example.org and email@example.com.