• Profit after tax rose 79% to US$623,819 as finance costs fell sharply
• Revenue increased 22% as sales volumes grew 23% during the first half
• Proplastics withheld an interim dividend while prioritising production capacity and planned capital expenditure

Harare- Proplastics has closed the half year ended June 2026 with profit after tax up 79% to US$623,819, yet shareholders will receive no interim dividend as the pipe manufacturer redirects capital towards additional production capacity.

Revenue increased 22% to US$11.73 million from US$9.59 million, supported by a 23% increase in sales volumes. Profit before tax climbed 50% to US$901,323, while earnings per share rose from US13 cents to US24 cents. The stronger bottom line was assisted by a 56% reduction in finance costs to US$83,219 from US$189,686 as the group continued reducing borrowings.

The dividend decision therefore places capital allocation at the centre of the results. Proplastics generated higher earnings, improved operating cash generation and continued paying down debt, but the group believes the stronger use of retained cash is expanding capacity ahead of anticipated demand from irrigation, water security and infrastructure projects.

That position carries greater commercial weight because Zimbabwe’s expected agricultural conditions are changing the demand environment for piping systems. It expects an El Niño induced drought during the forthcoming agricultural season and sees irrigation, crop production, livestock water supply and broader water security projects providing additional demand for its products.

The company is also expecting infrastructure development across several sectors to accelerate during the second half, coinciding with additional production capacity installed during the period. Management says projected demand and investment in new equipment leave the business positioned to capture opportunities during the remainder of 2026.

Profit growth came with a relatively stable gross margin. Gross profit increased about 20% to US$3.89 million from US$3.23 million, while the gross margin eased to about 33.2% from 33.7%. This means much of the improvement further down the income statement came from operating discipline and financing rather than a material expansion in product margins.

Administrative expenses increased 18% to US$2.31 million, below revenue growth, while impairment losses on trade receivables declined sharply to US$21,489 from US$97,648. Distribution costs, however, increased to US$605,740 from US$371,529, growing considerably faster than sales.

Profit before interest and tax rose about 24% to US$984,542. The subsequent reduction in finance costs widened the improvement at pre tax level to almost 50%, showing how debt reduction has begun changing the quality of earnings. Finance costs consumed about 8% of operating profit before interest and tax during the latest half compared with roughly 24% in the corresponding period.

The balance sheet supports that shift. Total borrowings declined to US$766,850 at June from US$830,756 in December, while total equity stood at US$16.4 million. Proplastics also repaid US$636,648 of borrowings during the half and raised US$294,000 from loans and borrowings, producing a net reduction in financing exposure.

Cash generation also strengthened. Cash generated from operations before interest and tax reached US$1.61 million from US$1.25 million, an increase of about 29%. After interest and tax payments, net operating cash flow was US$1.18 million compared with US$990,124 previously.

That cash is being recycled into the business. Capital expenditure reached US$343,304 during the first half, while Proplastics has budgeted approximately US$3.21 million for the full year to increase and maintain resources and existing facilities. The gap between first half spending and the annual budget leaves substantial investment still to be executed during the remainder of the year.

Working capital will require monitoring as production expands. Inventories increased 24.6% to US$7.08 million from US$5.68 million at December, growing faster than the 22% increase in half year revenue. Trade receivables increased 15% to US$4.17 million, while trade and other payables rose substantially to US$5.56 million from US$3.55 million.

The inventory build may support expected second half demand and higher production capacity, although its conversion into sales and cash becomes increasingly important as more capital is committed to expansion. Proplastics ended June with US$545,348 in cash, up from US$365,904 at December.

Exports remain a smaller part of the business. Export revenue of about US$600,000 contributed only 5% of turnover during the half, leaving earnings predominantly exposed to domestic demand. The company therefore enters its investment cycle with most of the immediate commercial opportunity tied to Zimbabwean irrigation, mining, construction and water infrastructure activity.

Outlook

The second half will test whether Proplastics can convert retained earnings and new production capacity into faster cash generating growth. Revenue has already benefited from higher volumes, while lower borrowing costs have materially improved the conversion of operating profit into earnings.

Three areas will determine whether that improvement can continue. Inventory needs to convert into sales without weakening margins, planned capital expenditure needs to produce additional utilisation, and finance costs need to remain contained as the investment programme accelerates.

The decision to retain the interim dividend places a clear performance threshold on management. If irrigation and infrastructure demand develops as expected, higher utilisation should allow Proplastics to grow earnings while maintaining the lower financing burden achieved during the first half. A slower conversion of inventory or renewed borrowing to fund the remaining capital programme would weaken that earnings progression.

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