Zimbabwe: Nts Says Road Works to Drive Demand for Tyres

10 January 2022

Business Reporter

National Tyre Services Limited (NTS) believes the on-going massive road infrastructure development programmes will boost demand for its tyres this year and in future.

Zimbabwe is carrying out road rehabilitation programmes, boosting businesses for construction and related companies as well as across value chains.

Suppliers of cement for instance have seen an increase in demand buoyed by various public infrastructure projects such as road works as well as individual home development projects.

For NTS, the anticipated economic growth coming from investments in other productive sectors should also see an increase in disposable incomes, a major boost to its business.

This, the company says, will be complemented with a conducive policy framework that supports economic growth as well as availability of foreign currency.

"National Tyre Services remains optimistic that the country will find effective measures to stabilise foreign exchange currency, manage inflation and generate enough electricity to power the industry.

"Current road infrastructure development and continued investment in productive sectors will create lucrative opportunities for tyre business," said NTS in an earnings update for the half year to September 30, 2022.

The business will also be watchful of Covid-19 pandemic shocks. Industrywide, the pandemic has had negative effects causing supply chain disruptions in addition to reduced trading hours.

"The company will remain focused on ensuring that there are adequate mitigatory measures in place to control the spread of the Covid-19 pandemic, thus complementing business operations in a sustainable manner," said NTS.

During the half year period, NTS recorded 68 percent growth in new tyre sales volumes on the back of improved stockholding levels. The company increased its distribution footprint through reopening of Hwange and Chegutu branches.

However, the Covid-19 pandemic continued to negatively impact operations as trading hours were lost as Government intensified measures to control the spread of coronavirus.

The period was also characterised exchange rate disparities between the official and illegal parallel markets coupled with rising inflation and power cuts, which negatively impacted the tyre business.

Retreading factories struggled to meet standard customer turnaround times due to power outages amongst other challenges while rubber importation faced border clearance delays.

Sales grew 51 percent to $434 million as the company implemented its turnaround strategy buoyed by the right product mix.

Gross profit improved by 51 percent to $208 million while total operating expenses increased by 58 percent to $399 million due to increase in administration costs incurred for new branches.

NTS reported a loss for the period of $62 million from a profit position of $53 million during the same period last year. A loss per share of 24,50 cents was recorded against earnings per share of 21,05 cents during the comparable period.

Total assets rose by 209 percent to $1,6 billion due to fair value adjustment on investment property and owner occupied property.

"Overally, the financial performance and position of the company remained strong for the six month ended September 30, 2021," said NTS.

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