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Business Reporter

Piping products manufacturer Proplastics says policy measures by Reserve Bank of Zimbabwe to deal with cash and liquidity crisis have brought its business to a standstill as people have largely adopted a wait and see attitude. This comes as Proplastics, which is listed on the Zimbabwe Stock Exchange last year, said turnover for the four months to April was flat compared to the same period last year, although volumes were significantly higher.Chief executive Kudakwashe Chigiya told analysts and shareholders before the company’s annual general meeting yesterday that Proplastics is “at a standstill” as the market digests the implications of the RBZ policy measures.

The central bank recently said that it will introduce bond notes, at par value with the US dollar, to stimulate and grow the economy by promoting exports, in the next two months.

The measures are only a part of a cocktail of measures the central bank will or has already introduced to deal with the liquidity crisis.

“Trading conditions have deteriorated following the recent pronouncement by the Reserve Bank which indicated that 50 percent of all exports will be transferred to the central bank and be returned as RTGS.

“This will have an adverse effect on our business as 80 percent of our export proceeds are required for importation of critical raw materials that we use to produce. As we speak, the business is actually at a standstill, as the market certainly waits for the introduction of bond notes and pronouncements that were made.”

Mr Chigiya said that the policy pronouncements have already had adverse effect on the company’s figures for May, which are way below half year figures for the prior year.

The group had recorded strong financial performance in 2015, with turnover for the year 6 percent higher than 2014 at $14 million, earnings before interest tax and depreciation 20 percent better at $1,7 million while volumes were 9 percent higher than prior year at 4 459 tonnes.

Giving brief trading update for the period Mr Chigiya said business conditions had deteriorated and the company had continued to face many challenges to its operations, including stiff competition from lower priced imports.

But in spite of the difficult conditions faced during the first four months of the year, volumes were 7 percent higher than the comparative period in the prior year driven by export orders the company managed to get.

“In terms of our exports, we got 14 percent contribution on our turnover from export orders and this was mainly driven by Zambia, partly Mozambique and a bit from DRC, as we take an aggressive approach on our export market.

“The gross profit margin for the period under review was also flat on last year. Operating costs were actually higher compared to last year, as we balance costs for unbundling Proplastics from Masimba, but we have also had headwinds within the business that we need to contain in terms of the cost aspect and management is putting in place programmes to contain that,” Mr Chigiya said.

He said profitability was marginally lower compared to the first four months of last year due to higher costs, which the group said it is succeeding in putting under control.

Proplastics said it has also tightened its credit control policy to minimise credit risks, which consequently negatively impacted on volumes, but this remains a measure the business needed to take given the difficult trading environment and the risk that is associated with it.

The group will focus on growing its exports, right pricing products and correct procurement among measures to steer the group out of the quagmire, while the central bank would be engaged to see how the bank can assist the firm.