Turnall returns to profitability

31 Aug, 2018 - 00:08 0 Views
Turnall returns to profitability

eBusiness Weekly

Kudzanai Sharara
Double digit growth in sales volumes saw one of Zimbabwe’s leading roofing products manufacturer, Turnall Holdings Limited, return to profitability for the half year ended June 30, 2018.

Turnall has been going through a bad patch in the last couple of years resulting in huge losses as fraud and mismanagement took its toll.

But a change in management, which coincided with the current boom in residential property development saw the company report a 77 percent growth in revenue on the back of a 63 percent growth in sales volumes.

The company’s financial director, Samson Mavende, told a results briefing this week, that revenue for the six months increased to $13,5 million from $7,6 million on the back of a 63 percent growth in sales volumes to 25,432 tonnes.

Gross profit leaps
Gross profit was up 158 percent to $5,2 million from $2,028 million resulting in an increase in gross profit margins to 39 percent rose from 27 percent.

Mavende attributed the increase in margin to “significant improvement in capacity utilisation; consistent supply of raw materials and spares; procurement efficiencies and cost control.”

Costs of sales grew slower than revenue growth at 48 percent to $8,3 million from $5,6 million.  Profit from operations were up 931 percent to $2,5 million from $244 573 while margins jumped to 18,6 percent from 3,2 percent. Operating expenses increased 52 percent to $2,7 million from $1,7 million.

Profit before tax increased by 688 percent to a profit of $2,1 million from a loss of $310 772. The company will not pay any taxes as it will be utilizing assessed losses from the previous years.

Despite the noticeable shift towards roofing tiles across many suburbs, asbestos cement roofing products volumes were up 53 percent at 11 829 tonnes. The same products contributed 78 percent to total turnover compared to 72 percent on prior year. The prevalence of informal settlements where cottages are the preferred structure is probably still pushing demand for asbestos roofing sheets.

Mavende said more than $3 million of the revenue out-turn was recorded in the month of June, attributing the strong performance to speculative customer activities ahead of elections.

 Locking value
Market sentiment is that construction materials are being used as a way of locking value with similar experiences being witnessed in the bricks and cement sectors.

Mavende said the company had continued with its model of making cash sales only while big clients and companies can still get credit terms of between 14 to 30 days.

As a result, trade receivables remained manageable at $1,6 million from $1,1 million, Mavende said.

Turnall matched the increased demand with production volumes, up 79 percent to 29,630 tonnes whilst capacity utilization rose 48 percent compared to 27 percent in the comparative prior year.

The group produced 13 449 tonnes of concrete products, an increase of 110 percent. Concrete products contributed 20 percent to revenue up from last year’s 15 percent contribution. Pipe volumes, however, were down 89 percent at 155 tonnes, contributing only one percent to revenue against 13 percent last year. Mavende attributed this to lack of demand although this was starting to improve.

In terms of the balance sheet, the company managed to reduce its net current liabilities to $5,8 million from $11,8 million on the back of debt restructuring and increased profitability.

Mavende said the payment of legacy debt is ongoing.

“We have managed to adhere to all payments plans agreed upon with key creditors and lenders when they fall due. We are also in good working relationships with all our creditors”, he said.

He also highlighted the improved cash flows cash generated from operating activities before working capital changes was $3,1 million against $0,97 million at the end of the 2017 financial year.

Meanwhile, managing Roseline Chisveto said the operating environment was characterised by worsening cash and foreign currency constraints which negatively impacted the group’s ability to import critical raw material and spares.

She, however, acknowledged that “competitiveness of the company’s product was enhanced through continued import restrictions introduced by government while strong focus on infrastructure projects and housing increased.

“The revival of mortgages by banks has yielded positive results for the group”, she added.

Export sales were focused on Zambia, mainly on concrete roofing tiles. “We see ourselves getting into South Africa and Mozambique as these markets are only taking non-asbestos products”, she said.

The company has started receiving fibre from the local Shabanie Mashava Mines (SMM) mines and has conducted successful trials.

“We commenced with 10 percent local fibres and increased to 50 percent usage against imported fibres and results have been satisfactory”, said Chisveto.

Going forward she said key focus areas will be on dedicating efforts towards production and sales volume growth; enhanced customer service; improved risk management and internal controls; manufacturing excellence; innovation, research and development; improved liquidity and financial growth as well as improved profitability and return to shareholders.

 Improved demand forecast
Chisveto forecasts improved demand “as we approach the peak period for the construction industry which is the second half of the year.”

“We expect Capex to increase mainly on plant upgrades scheduled in the last quarter of the year. Turnall seeks to invest a further $600 000 to improve factory capacity by a further 20 percent.

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