Zimbabwe: Proplastics' New Factory Complete

9 September 2019

Zimbabwe Stock Exchange-listed paramount producer of piping material, Proplastics, has finally completed its factory, with the plant expected to start operating by the end of the third quarter after the completion of pending minor electric works.

The firm manufactures a variety of piping products for usage in mining, agriculture and infrastructure development.

"The new factory construction work is largely complete except for a few remaining electrical works. Focus is now shifted on making the plant operational by the end of the third quarter. As envisaged when the Group embarked on this project, we expect operational efficiencies to improve with the migration to the new factory, thus driving down unit costs.

"In this regard, a more stable supply of electricity is vital in order to ensure export competitiveness and we will engage relevant authorities in order to seek a solution to this critical issue," said company Chairman Gregory Sebborn in a statement accompanying the company's half-year financials to June 30, 2019.

The new factory project was initially earmarked to be completed by the first quarter of 2018 but foreign currency shortages threw spanners into the works resulting in the about US$5 million project failing to be completed within the targeted timeframe.

The project is designed to boost the company's production capacity as well as enhancing its export competitiveness through factory efficiencies and economies of scale should electricity supply be stable. Earlier reports had indicated the new factory will see production capacity mounting from about 8000 tonnes to 32 000 tonnes per annum.

Meanwhile Proplastics manoeuvred through an "extremely challenging operating environment to post an 87 percent boost in revenue to $20,1 million compared to $10,7 million posted in the prior year comparative.

The boost, however, has come amidst a decline in production volumes by 28 percent compared to the previous year. The company managed to compensate the volumes decline with cost containment to 16 percent despite inflationary pressures.

Growth in revenues translated to a boost in gross profit to $11,6 million compared to the prior $3,4 million, more as a result of contained cost of sales. Profit after tax at $5,4 million compared to $1,2 million achieved in the prior period was commendable.

The financial positives were highly commendable despite an upsurge in overheads and financing costs.

"Overheads increased by 156 percent due to the inflationary environment and financing costs went up by 144 percent driven by costs in establishing new facilities with the banks and interest on lease liability arising on initial application of International Financial Reporting Standards," said Mr Sebborn.

Going forward, the piping concern is hopeful the interbank market will grow to meet its foreign currency requirements. However, short-term demand is expected to remain subdued within a challenging economic environment.

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