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Surging demand steers Proplastics to profitability

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PROPLASTICS Limited posted a 287% profit after tax jump to $352 946 for the half-year ended June due to a late surge in demand for the company’s products in the latter period under review.

BY TATIRA ZWINOIRA

The company’s jump in profit was from 2016’s comparative period’s profit after tax of $91 243. Proplastics Limited recorded a net profit margin of 6%, however, looking at the companies inventory turnover ratio of 1,01, the company struggled to flip its products for cash.

In a statement accompanying the company’s results for the period under review, Proplastics Limited group chairman Gregory Sebborn said that depressed demand, incessant rains and liquidity challenges hampered their growth.

“However, demand started to improve as we drew towards the end of the period, and it is heartening to note that the group managed to recover from the slow start to the year and post a relatively strong performance,” he said.

“The foreign currency situation improved in the first quarter of the year, but the usual constraints have returned to hamper the servicing of foreign obligations and the purchase of raw materials. During the period under review, the group tightened its credit policy further, as the credit risk in the economy continues to grow.”

In that regard, he said the group extended the tight credit policy to the company’s export business which had an adverse effect on sales.

Proplastics Limited profitability levels remained positive and showed potential for further growth.

Turnover for the period was also up 7% to $6,27 million from a 2016 comparative of $5,87 million owing to increase in sales volumes by 4% due to the late surge in demand.

In terms cash flow, Proplastics Limited cash generation remained negative for the period under review, which the company blamed on the overall liquidity challenges in the economy.

This was evident in the drop in net cash generation from mostly operating and investment opportunities by 85,37% and 82,55% to $116 858 and $33 693, respectively. This was down from the 2016 comparative of $799 179 and $193 153 respectively.

Exacerbating the cash flows was an increase the company’s financing needs by 67,31% to $484 636 from 2016’s comparative $289 663.

“Following the slow start to the year because of depressed demand and the persistent rains, we have seen demand starting to improve and we expect the upward trend to continue into the second half of the year. This demand will be underpinned by initiatives in agriculture, mining, housing development and other construction projects,” Sebborn said.

One opportunity going forward for Proplastics Limited will be in the property development projects banks are investing in for mortgage finance.

As such, Proplastics Limited has a potential major market to supply piping for these projects.

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