- Revenue for the quarter was flat at 25%
- From 36%, volumes grew by 10%
- Sales volumes grew by marginal 10%
Harare- Leading plastic products manufacturer, Proplastics Limited Zimbabwe, listed on the local currency bourse, the Zimbabwe Stock Exchange (ZSE) recorded dampened performance in the first quarter ended 31 March 2023 across key units due to electricity challenges encountered.
The Group’s revenue, volumes, and sales did not surpass 2022’s first quarter performance.
The Group further highlighted other causes such as increase in prices in global supply of key raw materials, intermittent forex supplies deficits and retrogressive monetary policies.
However, the business continued to participate on the foreign currency auction floor with allocations amounting to USD600K having been received for the quarter with USD400K already disbursed.
“The just-ended quarter was marred by serious power cuts which significantly compromised production throughput and efficiencies,” said the Group.
“Production was largely run on a high-cost diesel-powered generator, thereby impacting on the price of the final product,” added the Group.
Anaemic power supplies have been a detrimental effect on the business efficacy. In the presentation of the full-year results ended 31 December 2022 where it recorded a profit downturn, the Group said unfortunately, the supply of electricity remained a major challenge, causing massive disruptions to production.
Further, in 2022, the Group lost a handsome time of production of up to 4 weeks due to power interruptions and the Group incurred considerable supplementary costs in operating the large backup generator. This was the same recipe in 2023’s first quarter.
Intermittent electricity woes became rife post-COVID-19 pandemic period when the whole economy was opened. Power generation was strained by the ageing power plants at Hwange Thermal Power Station.
Electricity Woes were further exacerbated the recurrent drought spells between the 2021 and 2022 farming season which dampened water levels at Kariba Dam. Generation at Kariba reached below 10% in the first quarter under review, with the power supply reduced to 150MW against a national need of 1200MW.
Due to dampened electricity generation, production costs are soaring as companies divert to alternative power supplies. This inflates production expenses, reducing companies’ efficacy. This is further exacerbated by a hyperinflationary environment, exchange rate volatilities and a decaying currency. Further mounting to production woes are the 25% of forex proceeds surrendered to the RBZ in return for the Zimbabwe dollar using the Auction Market rate.
The disadvantage of 25% retentions is that suppliers quote the parallel market rate when charging for their raw materials. The parallel market rate doubles the formal market rate. This means companies are given half-value of their earnings, thus running a loss.
Due to a busload of the above-mentioned problems, the Group’s revenue flattened against a 25% increase during the same period in 2022.
“Revenue remained flat compared to the previous year as our selling price retreated due to reduction in global prices of major raw materials,” said the Group.
Against a 36% increase in volumes during the first quarter of 2022, during the period under review, production volumes grew by 10% due to interruptions related to power cuts which also affected the sales product mix.
Exports contribution was 15% to the total sales revenue, representing a 91% growth compared to the same period last year. In the 2022’s first quarter, exports contributed 7% to total sales.
“Despite the drawback of the power challenges, the factory remains capacitated to convert all orders in time as a result of modern investments into the new factory,” the Group concluded.
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