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Liquidity constraints to hurt Turnall products

TURNALL Holdings Limited (THL) expects liquidity constraints to adversely impact on demand for the firm’s products in the second half of the year.


TURNALL Holdings Limited (THL) expects liquidity constraints to adversely impact on demand for the firm’s products in the second half of the year.

Local financial services firm, IH Securities recently stated that floating the Zimbabwe dollar against the US dollar created a mismatch between foreign currency denominated assets and liabilities on some bank balance sheets that would affect bank lending.

“Liquidity constraints are starting to surface in the economy and are expected to continue, this will have an adverse impact on the demand for the group’s products,” said THL chairperson Rita Likukuma, in the firm’s financial results for the half year ended June 30, 2019.

In the first half, the liquidity constraints witnessed in the market resulted in reduced aggregate demand across the entire construction industry.

According to IH Securities, floating of the Zimbabwe dollar resulted in the translation of foreign denominated assets at the interbank rate. And, in cases where the banks have net liabilities denominated in foreign currency, this resulted in a larger increase in liabilities than assets.

As a manufacturer of construction materials, THL will be affected in that most home owners use loans from banks’ to build.

To militate against this decrease in demand, Likukuma said THL would turn to exports.

“The group has now focused on the regional market and expects to export to South Africa and Mozambique in order to generate foreign currency. The group expects exports to increase significantly compared to the previous year,” she said.

Likukuma further said the firm would be leveraging off peak season in the second half to improve volumes.

“There is evidence that long overdue work on rehabilitation of water and sewage infrastructure is now taking place and the group has maintained its pipe making capacity in order to satisfy demand from this sector. The group will improve cash generation to reduce borrowings after the significant increase in interest costs at the end of the period under review,” she said.

Meanwhile, turnover for the half year increased to $25 million compared to $13,5 million in the 2018 comparable period.

The group reported profit after tax from operations of $6,8 million from the 2018 previous comparable of $1,38 million.

Total assets increased to $44,73 million in the period under review from 2018’s comparable $36,75 million.

THL had a current ratio of 1.45 showing the company was in a position to cover its liabilities should they become due.