- ProPlastics report a 10% drop in volumes.
- Export revenue declined by 30%.
- A total of USD2,7 million was spent on capital expenditure within the period.
ZSE-listed manufacturing company, ProPlastics Limited (formerly known as Murray & Roberts and Masimba Industries Limited) reported a 10% drop in sales volume across its offering of plastic pipes and related fittings in the period under review. The drop was attributed to “depressed disposable incomes”. This statement is supported by a year-on-year inflation rate of 280.40%, which has caused wide-reaching adverse consequences across the economy.
The “Housing and Utilities” component contributed 27.6% of the rise seen in the Inflation Consumer Price Index for the period in review, of which this component represents a significant share of demand for ProPlastic's offering. Rising prices in housing and utilities imply and decline in demand for related products(such as pipes and fittings).
Despite the decline in demand and subsequent volume drop, ProPlastics achieved an increase in revenue of up to 18%. This implies either an increase in the company’s overall prices coupled with an inelastic segment of its clients; or perhaps a shift in product mix which prioritized the sale of high-value items.
Revenue from exports declined by 30% compared to the prior period because of currency volatility experienced during the period. This is economically counterintuitive at first glance, given that economic theory states that a depreciating currency makes exports more competitively priced globally and should therefore result in increases in export revenues. The twist in the logic is that Zimbabwe’s exports are traded in US dollars, and thus a depreciating ZWL does not result in a competitive advantage.
Gross profit margins for the reporting period improved compared to the prior year. This growth was a result of efficiencies realized from the plant modernization initiatives. Profit was hampered at the beginning of the period due to exchange losses resulting from overdue payments to foreign creditors. However, profitability improved in the third quarter.
This improvement is expected to continue into the fourth quarter. With a total of USD2,7 million spent on capital equipment within the period, progress has been seen and is expected to result in improved full-year results.
