Harare – Zimbabwe Stock Exchange-listed plastic pipe manufacturer, Proplastics reported a 50% decline in sales volumes in the third quarter ended 30 September 2019 (Q3 2019) compared to the corresponding period last year due to subdued consumer demand.
Purchasing power has been largely shrinking owing to runaway inflation as well as the continuous depreciation in the value of the local currency.
Inflation rose to 353% in September 2019 year on year, whilst the local currency has lost over 80% of its value since reintroduction in June 2019.
“Cumulatively, the tonnage for the nine months is 37% below prior year,” Group Chairperson Gregory Sebborn said in a statement.
Further compounding businesses’ operational challenges is the inadequate power supply which has forced many businesses to turn to alternative sources of energy, thus driving operating cost upwards.
“Electricity supply remained the biggest challenge in the 3rd quarter and the Group had to rely heavily on the stand by generator to satisfy customer orders.
“This resulted in considerable increase to production costs. In addition, water supply has also been a challenge and the Group has had to rely on purchasing bulk water for normal consumption and process cooling,” Mr Sebborn said.
He said turnover for the period was above both budget and prior year. Growth in turnover and profitability is largely a function of inflationary driven price adjustments.
The segmental revenue contribution was driven by Merchants (29%), Irrigation (28%), and Civils (22%). The borehole drilling sector recorded 70% growth on prior year.
“The driving factor for this growth was the need for improved availability of alternative sources of portable water, in response to the prevailing drought,” Mr Sebborn said.
“The Civils sector contracted by 44% on prior year volumes, due to lack of disposable liquidity in the economy.”
Meanwhile, Mr Sebborn said that construction of the new factory has been completed and migration process has begun and will be followed by installation of the new equipment.
“We are greatful to the authorities for granting us a complete waiver on duties and other taxes on the capital equipment. We expect operational efficiencies to improve significantly with the construction of the world class factory,” he said.
The new factory is expected to increase the company’s production capacity to 32,000t a year from 8,000t which is a fourfold increase.
Proplastics manufacturers a range of piping products used in housing construction, mining, agriculture and infrastructure development. In 2016 the company was spurn off Masimba to become a standalone entity and to deepen its turf.
Besides Zimbabwe, Proplastics exports its produce into the region.
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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, firstname.lastname@example.org and email@example.com.