- Net loss widened to ZWL577 million
- Exchange losses increased from ZWL124 000 to ZWL191 million
- Sales revenue grew by 21%
Harare- National Tyre Services (NTS) has concluded its fiscal year ended 31 March 2023 with a substantial loss of ZWL577 million, representing a stark reversal from the prior year's profit of ZWL208 million. This significant loss was attributed to a myriad of intricate factors, including exchange rate disparities, protracted power outages, relentless inflationary pressures, and acute shortages of foreign currency.
The prevailing economic landscape had undoubtedly presented formidable challenges for NTS, as it had to grapple with the intricate dynamics of exchange rate fluctuations which ate up a big chunk of profit and eroded its bottom line. The persistence of power outages exacerbated the company's financial woes, impeded its operational efficiency and hindered productive output.
Monetary loss, which ate up a big chunk of profitability rose significantly to ZWL191 million compared to a meagre ZWL124 thousand in 2022. The company further experienced a decrease in operating profit from ZWL311 million to ZWL1 billion compared to the previous year.
Gross profit witnessed an 8% decline, diminishing from ZWL2,686 billion to ZWL2,462 billion. The company attributed the contraction to the escalation of costs associated with imported products, adversely impacting the overall cost of sales.
A high import bill had significant ramifications for NTS as it impacted the company's ability to provide cost-effective services as increased import costs resulted in higher prices for customers and squeezed profit margins. These were exacerbated by fluctuations in exchange rates which lead to enormous exchange losses, further eroding profitability and financial stability.
However, there was an increase in total comprehensive income for the period, rising from ZWL4 billion to ZWL5 billion when compared to the previous year.
The company said it retained a large corporate customer base courtesy of the availability of Dunlop tyres, resulting in a notable 14% increase in premium sales volume compared to the prior year.
“National Tyre Services (‘NTS’) remains viable as the competitive space continues to be crowded by new entrants across the country,” said the company in a statement.
“The budget brands segment was impacted by the restricted access to foreign currency which in turn affected product availability.”
Despite a decline in retreading performance, NTS managed to maintain its presence in key retreading fleets. The company took steps to widen its range of suppliers and revamped its supply chain management to effectively manage costs and position the business for the future.
As a result of these efforts and the continued implementation of their turnaround strategy, NTS experienced a significant growth in sales revenue. Adjusted for inflation, sales revenue increased by 21% from ZWL3,579 billion in 2022 to ZWL4,332 billion. This positive revenue growth reflects the progress made by the company in improving its financial performance.
The company was able to maintain total operating expenses at prior levels when adjusted for inflation. Operating expenses were recorded at ZWL2,170 billion, slightly lower than the ZWL2,181 billion recorded in 2022. This was achieved through cost containment measures implemented by the management team, indicating their commitment to controlling expenses and improving operational efficiency.
Considering the need to restore working capital to adequate levels in order to support the business, the Directors have made the prudent decision not to declare a dividend. This decision reflects the priority placed on strengthening the company's financial position and ensuring its long-term sustainability.
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