Proplastics reports strong third quarter earnings
HARARE – Plastic pipes and fittings manufacturer, Proplastics reported a rise in quarterly demand for its products and has put in place robust contingency plans to ensure the availability of key raw materials in order to meet the demand.
Chairman Gregory Sebborn said the global impact of the coronavirus has significantly affected the group’s domestic and regional markets resulting in significant interruptions in the entire supply and value chains.
“The global shortage in the supply of PVC feedstock, a derivative of crude oil, due to closing of facilities as a result of the Covid-19 pandemic has resulted in shortages and price increase of both the raw materials and finished goods.
“The imbalance in supply and demand is likely to spill over into Q1 of 2021. The supply of water and electricity remained stable during the period under review,” he said.
While demand for the group’s products improved significantly, Sebborn said, considerable pressure was experienced on the raw material and product supply side in order for the business to meet increased demand in Q3. As a result, sales tonnage for Q3 grew by 64% compared to same period last year.
“In turn, year to date volumes responded positively from a reduction of 18 percent in HY2020 to 10 percent above similar period last year at the close of the third quarter. Segmental contributions from irrigation, mining, merchants, civils, and borehole drillers registered positive growth in the third quarter,” he said.
Exports rose 75 percent and contributed 7 percent from 4 percent to total revenue in the period under review.
Gross Profit margins, in historical figures, increased to 63 percent from 47 percent from the half year weighted average. Resultantly, the margins are now above the prior year levels.
“The growth in sales volumes and turnover supported by outstanding productivity from the new factory permeated through to a strong earnings performance for the quarter,” he said.
Current ratio improved to 1.34 from 0.7 at year end and the gearing ratio remains low at 9 percent. Foreign creditors closed Q3 at US$400 000 compared to US$1 million at the end of 2019 as the business benefited from the Introduction of SI85.
“It is pleasing to note that the business is now within the trading terms as arranged with its foreign suppliers.”
The easing of lockdown regulations, a stance also being observed in the region, he said, is anticipated to spur demand further. The company expects the Engineers from Italy to be back in the country in Q4 to commission the new mixing plant.
“This will again go a long way in enhancing factory efficiencies as was envisaged when the project was conceived,” Sebborn added.
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