High operating costs slow Border profitability

ZIMBABWE Stock Exchange-listed agri-industrial concern Border Timbers Limited profit for the six months to June declined to $1,8 million from $5 million recorded during the same comparative period last year, on the back of growing wage and arson fire-related costs which ravaged the company’s plantations in Manicaland.

Report by Business Reporter

 
Revenue rose to $27,9 million from $21,9 million during the same comparative period driven by increased sales volume in rough sown timber and poles while finance costs climbed to $1,9 million from $1,1 million.

The cost of fire losses, according to the group, stood at $2,7 million.

“Wage costs have continued to grow ahead of revenue growth and have reached levels that are causing a strain on viability,” reads a statement issued by the company’s board on Tuesday.

“There is still a great degree of uncertainty in the economy. For your group, the refinancing of the short-term debt to long-term debt remains critical. Recapitalisation of the business has had a positive effect on production volumes and has resulted in the growth of the biological asset over the past three years.”

The company announced that an ongoing exercise to build its forestry resources had resulted in 1 891 hectares being planted, up 48% from the previous year.

“Demand for housing locally remains firm with a number of housing projects being undertaken.

This has resulted in a firm demand for the group’s products. The demand for transmission poles also continues to be strong due to electrification projects being undertaken by most power utilities within the region,” the company said.

“Future capital expenditure will be scaled down as the recapitalisation programme progresses. Only key capital expenditure related to productivity and efficiency improvement will be undertaken. Going forward, the business will look at utilising more contractors across the value chain as they become better equipped to handle the contracts. This will lesson the burden on the business and improve return.”

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