- Total Borrowings Surge: Increased by 43% to $1.24M, comprising $700,000 in short-term banking facilities and $540,572 in shareholder loans
- Loss Widens: Operating loss expanded to $1.2M, the same with after tax loss due to rising costs
- Key Projects Underway: Invested $2M in CAPEX, focusing on new templates for the Bulawayo sheeting plant and a state-of-the-art sheeting facility in Harare
Harare- Turnall Holdings increased its capital expenditure (CAPEX) to US$2 million in the half-year ended June 30, 2024, compared to just $72,971 in the same period last year.
This investment primarily focused on new templates for the Bulawayo sheeting plant and a new sheeting facility in Harare, funded through proceeds from a shareholders' rights issue.
The Bulawayo plant is central to Turnall's roof sheeting business, and enhancing manufacturing capacity at the Harare location is expected to significantly improve operational efficiency.
"Civil works are currently underway in preparation for the installation of the machine," said Grenville Hampshire, the group's chairperson.
The state-of-the-art plant is projected to enhance production efficiencies and lower distribution costs due to its proximity to key markets.
Despite these investments, rising costs have severely impacted the company's profitability.
The operating expenses to sales ratio climbed to 42%, up from 39% in the prior year, with total expenses increasing by 12%. This surge was largely driven by inflationary pressures, particularly before the announcement of the monetary policy statement.
The Group also faced challenges related to exchange rates, incurring a loss of $135,207 on the conversion of Zimbabwe dollar transactions to USD during the first quarter, a period marked by instability.
Additionally, distribution costs for products shipped from the Bulawayo plant amounted to $359,259, reflecting significant increases in transport rates due to tariff hikes imposed by transporters.
Extensive renovations were carried out on investment properties to facilitate improved rental income, adding to the financial strain.
As a result, the Group reported an operating loss and after tax loss of $1.2 million during the review period.
From a financial analysis perspective, Turnall's increased borrowings and widening loss raise concerns about its financial stability. However, the company's strategic investments and growing revenue suggest potential for long-term growth.
The company's ability to manage its debt and optimize costs will be crucial in navigating the current challenging market conditions.
The construction materials sector, in which Turnall operates, faces challenges due to rising raw material costs, inflationary pressures, and exchange rate volatility.
However, industry players are adapting through diversification of product offerings, investment in efficiency-enhancing technologies, and strategic partnerships and collaborations.
Turnall's investment in new technologies and expansion of its product offerings positions it well to capitalize on emerging trends.
To improve financial performance, Turnall may consider cost optimization strategies to mitigate inflationary pressures, diversifying revenue streams through new product offerings or geographic expansion, enhancing operational efficiency through technology adoption, and strengthening relationships with suppliers and customers to secure favorable terms.
On a positive note, Turnall's turnover for the half-year reached $5.5 million, a 4% increase from the previous year's $5.3 million, driven by an 11% rise in sales volumes.
However, average selling prices dropped by 6%, attributed to a sales mix skewed toward concrete products, which, while high in tonnage, offer lower margins.
Despite these financial pressures, Turnall generated cash flows from operating activities of $1.1 million, reflecting a substantial 127% growth compared to last year.
Inventory levels increased by $1.1 million as part of a strategic decision to stockpile fiber to mitigate long lead times. This was financed through credit, which also led to a sharp rise in trade and other payables.
Conversely, trade and other receivables decreased by $1.1 million, mainly due to the receipt of components for the new sheeting plant that had been prepaid.
Turnall secured short-term banking facilities amounting to $700,000 to bolster working capital and received $540,572 in shareholder loans, primarily to fund civil works in preparation for the new machinery.
With a focus on revenue growth, improved production efficiencies, and cost containment, Turnall Holdings aims to navigate the current challenges and restore profitability in the coming periods.
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