- New tyre volumes declined by 1%
- Retreading tyres decreased by 13%
- Overall volumes performance succumbed by 14%
The graph below summarises the Company’s Q3 performance
Harare- Zimbabwe’s largest distributor and retailer of new tyres and tubes for the automotive industry, National Tyre Services has reported reduced sales volumes in retreading and new tyres for the third quarter ended 31 December 2022 due to erratic power supplies.
Power utility, ZESA has been struggling to generate enough-average electricity required by the nation to sustain operations. During the period from October to December 2022, 12-18 hours load shedding schedules were introduced with other areas running up to 24 hours in darkness due to the depletion of water levels in Kariba dam for power generation and consistent failure of the ageing power plants at Hwange Power Station.
The power utility even missed the 2023 electricity self-sufficiency target and the addition of Hwange’s Unit 7 on the national grid which was due by end of January 2023.
The company’s new tyre sales volumes dropped by 1% to 8847 in the period under review from 8931 in the comparative 2021 period due to the negative impact of power outages on the Company’s retail operations, which also affected the cumulative performance.
Retreading sales volumes declined by 13% to 3081 from 3560 as retreading factories were severely affected by power challenges.
Ultimately, year-to-date December 2022 overall volume performance decreased by 14% compared to the prior year as the energy crisis deepened, negatively affecting demand for tyre services across our retail outlets.
“Depressed electricity generation during the third quarter of 2022 resulted in increased load curtailment countrywide,” the Company said in a trading update.
“Revenue generation and customer service delivery were negatively affected by power outages that disrupted the Company’s retreading factories and retail operations,” added the Company.
However, tyre services grew by 5% during the period under review compared to the same period last year courtesy of good workmanship that improved demand for tyre services across all our branches.
In the outlook, the Company will continue to face power challenges as the government seems to be overwhelmed by the power crisis. Hence, there is a need to invest in solar systems.
The Company needs to take transformational strategies, that will cost the Company’s earnings in the short-term but generate more returns in the long run.
Zimbabwe is not only suffering from power anaemia as I illustrated in this article https://www.bitlylinks.com/WTUsCflgs but from other headwinds such as curtailed consumer purchasing power due to usurious bank policy rate and rapid depreciation of the local currency.
The Company, which heavily depends on Auction Market for foreign currency should be cautious this year as the elections mode is likely to cause scarcity of the US dollar as investors will be seeking to hedge their assets against the local currency.
There is a need to employ cost-cutting strategies, increasing productivity though being mindful of the company budget.
In 2021, the company lost a huge chink of profits due to power blackouts and foreign exchange delays.
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