PIPE manufacturing concern Proplastics’ inflation-adjusted profit-after-tax ballooned 1 300% to $52 million during the year ended December 2019 despite an adverse trading environment punctuated by non-availability of utilities and poor exchange control policies.
BY FIDELITY MHLANGA
The growth was from $3,9 million posted same period last year. Volumes for the year declined 26% compared to the previous year.
The company bemoaned an extremely challenging operating environment during the period under review.
“Certain policy pronouncements made during the year relating to functional currency and exchange controls have had negative impact on the business. Since the introduction of the Zimbabwe dollar in February 2019, its value has continued to slide and this has brought economic instability and has created a difficult environment for future planning and value retention,” company chairman Gregory Sebborn said in a statement accompanying the results.
The company said the introduction of the interbank market for foreign exchange has not brought about the desired access to foreign currency for importation of raw materials.
Demand for the group’s products remained subdued throughout the year, mainly as a result of the difficult trading environment that the country is facing which has resulted in the erosion of customers’ purchasing power.
‘’The non-availability of utilities, in particular electricity, for the greater part of the year, posed additional challenges. The group had to rely on the standby generator to keep operations running and this added considerably to production costs, with the fuel itself also being a scarce commodity on the market,” Sebborn said.
Notwithstanding the difficult operating environment, the group said it managed to post a solid financial performance both in historical and inflation-adjusted terms.
“Turnover for the year was $114 300 451 in historical cost terms, up from $24 091 989 in prior year. In inflation-adjusted terms, turnover was $234 429 046 up from
$198 087 755 in prior year,” Sebborn said.
The company’s assets grew to $310,8 million from $158,3 million prior year on inflation-adjusted terms.
Property, plant and equipment improved to $228,5 million from $70,8 million prior year after the company invested in a new factory.
During the same period, total liabilities increased to $75,9 million from $50,1 million. Cash and cash equivalents closed at $5,6 million from $7,2 million prior year.
Sebborn said working capital position weakened as all available resources were channelled towards the completion of the factory project, which was financed fully from internal resources at the same time, ensuring that raw materials were adequate.
Sebborn said the company’s new factory was now complete and operational with new mixing plant having been successfully installed and awaiting commissioning.
The pipe manufacturing concern envisages a vast improvement in operational efficiencies that enables it to serve both the domestic and export markets more effectively.
However, the threat of COVID-19 looms large on the business, stalling raw material and spare parts importation.