- Sales volumes for Q3 2023 declined by 7% attributed to product outages of roofing sheets caused by fibre supply delays
- The ongoing war in Ukraine disrupted the availability and delivery of this key raw material
- The company sought alternative sources from Brazil
Harare- Turnall Holdings Limited, a tiles manufacturer, reported a 7% decline in sales volumes for the third quarter ending on September 30, 2023. The sales volumes decreased from 9,132 tonnes to 8,526 tonnes. This decrease can be attributed to product outages of roofing sheets caused by delays in the supply of the key raw material, fiber. The delays in fiber supply were primarily due to the impact of the war in Ukraine, which disrupted the availability and delivery of the necessary raw material.
Building products accounted for 53% of the sales volumes, concrete products contributing 46%, and AC Pipes making up 1% of the total sales volumes. Building products encompass various construction materials such as roofing sheets, tiles, and other building components, while concrete products consist of precast concrete items used in construction. AC Pipes, which are asbestos cement pipes, had a relatively smaller contribution to the overall sales volumes.
The invasion of Ukraine by Russia in February 2022 had a profound impact on the global distribution channels for products and commodities primarily manufactured in mainland Ukraine. Simultaneously, the imposition of sanctions on Russia exacerbated the situation by further restricting alternative options for besieged Ukraine.
Both Ukraine and Russia have a notable presence in the fibre industry. Ukraine is renowned for its production and export of diverse fibre types, encompassing textiles, synthetic fibres, as well as natural fibres like flax and hemp. Similarly, Russia possesses a significant fibre industry, involving the production and export of various fibre types such as synthetic fibres, wool, and cotton. The conflict and subsequent disruptions in Ukraine have affected the fibre industry in both countries, influencing supply chains, production, and the export of fibre-related products.
In response to the challenges caused by the fibre supply disruptions, the company proactively looked for alternative sources of fibre to mitigate the impact in the long run. They turned to Brazil as an additional source to complement their existing fibre supplies. It is a major player in the global fibre market, particularly in the production and export of natural fibres such as cotton, sisal, jute, and other plant-based fibres. Brazil's fibre industry also includes synthetic fibres, such as polyester and nylon, which are widely used in textiles and other applications.
As a result, the company anticipates that their business operations will gradually normalize in the fourth quarter of 2023.
In addition to the fibre supply issues, the company also faced setbacks in trading activity. The liquidity crunch, low disposable incomes, and price distortions prevalent in the economy had a negative impact on their trading operations. These factors created challenges for the company in terms of generating sales and conducting business transactions effectively.
However, with the expectation of fibre supply normalizing and potential improvements in the overall economic conditions, the company aims to overcome these challenges and restore their trading activities to a more favourable state.
The company has made significant progress in its expansion efforts by securing funding through a successful Rights issue for the construction of a new state-of-the-art fibre cement sheeting plant and a Glass Reinforced Plastic (GRP) Plant. These new facilities will help modernize the company's operations and enhance production efficiencies.
Despite the challenges faced in the third quarter of 2023, the company's board and management remain committed to their strategic goals. These include re-capitalizing the factories, improving production efficiencies, controlling costs, and enhancing the quality of their products and services.
The company said it is in the advanced stages of acquiring a new sheeting plant for Harare, which is expected to be commissioned by the third quarter of 2024.
This development will have multiple benefits, including a reduction in transportation costs from Bulawayo, increased sales volumes, and improved profitability. The new plant will enable the company to serve the market more efficiently and effectively, leading to potential growth opportunities.
Equity Axis News