Harare – Zimbabwe’s leading plastic pipe manufacturer, Proplastics’ production volumes tumbled by 28% during the half year period ended 30 June 2019 compared to the same period last year with the Group highlighting that the non-availability of utilities in particular electricity has severely hampered operations.
In a statement accompanying the Group’s half year financial results, Group chairperson Gregory Sebborn said the company has had to rely on the standby generator for extended periods to keep operations running.
“This has added considerably to production costs,” Mr Sebborn said.
However, despite a myriad of challenges currently dominant in the operating environment, Proplastics managed to record a decent financial performance during the period under review.
Revenue increased by 87% to $20.1 million compared to $10.8 million recorded in the same period last year.
However, the Group cautioned that such comparison must be viewed in light of the significant devaluation in the local currency.
Government in February 2019 removed the 1:1 exchange rate between the local currency (Bond notes, bond coins and the electronic RTGS$ balances) against the US dollar seeking to bring parity within the foreign currency exchange market to address the on-going forex shortages which is negatively impacting business operations.
As a result, a like for like comparison of the companies’ financials for the current year against the prior year could be misleading, thus need to be viewed carefully.
The Group posted a 240% increase in gross profit to $11.6 million during the period under review compared to $3.4 million achieved in the same period last year.
This was achieved after cost of sales was contained to a 16% increase despite the huge inflationary pressures in acquiring raw materials.
“Overheads increased by 156%due to inflationary environment and financing costs went up by 144% driven by costs incurred in establishing new facilities with the banks and interest on lease liability arising on initial application of International Financial Reporting Standards 16 (IFRS16),” Mr Sebborn said.
EBITDA improved to $8.4 million while profit after tax jumped 346% to $5.4 million compared to $1.2 million in the prior year.
On the outlook, the Group expects short term demand to remain subdued given the current economic environment.
“Moreover, current electricity challenges will continue to weigh down business operations,” Mr Sebborn said.
“We have however, managed to keep our customers supplied through carefully planned production.”
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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, email@example.com and firstname.lastname@example.org.