Zimpapers Logo

Nelson Gahadza
Senior Business Reporter
Proplastics Limited says it is now focussed on strengthening the group working capital position after its recently completed new factory and mixing plant became fully operational.

The Zimbabwe Stock Exchange (ZSE) listed company manufactures and markets plastic pipes and fittings, specialising in the production of polyvinyl chloride (PVC), high-density polyethylene (HDPE), low-density polyethylene (LDPE) pipes and related fittings.

The pipes and fittings are manufactured for various applications in irrigation, water and sewer reticulation, mining, telecommunications and building construction.

Group chairman, Mr Gregory Sebborn, said in a statement of financials for the year ended December 31, 2021, demand will continue to be buoyed by the various sectors of the local economy.

“There is an upsurge in demand especially from the mining sector as well as other sectors,” he said.

He noted that the optimisation of the group’s working capital, in particular raw material stocks, will depend on foreign currency availability on the auction platform as current allocations are well below the firm’s requirement.

“The group has maintained sound relationships with suppliers, but there is risk of straining these if allocations remain inadequate and the settling thereof experience delays.

“The Reserve Bank of Zimbabwe has recently provided some assurance that the auction backlog is to be significantly reduced and the auction made more relevant to the requirements of the market,” said Mr Sebborn.

He said the group’s new 500mm line had since arrived and was already under commissioning. “This line will undoubtedly address the demand for large bore PVC diameter pipes, which is on the rise and significant orders for this product have already been received prior to commissioning,” Mr Sebborn said.

He said Proplastics was now well positioned to capitalise on certain opportunities to widen its footprint in the region and efforts are underway to investigate in detail these potential initiatives.

In terms of financial performance, the group’s turnover grew 57 percent to $2,773 billion from $1,762 billion in prior year on the back of a 24 percent increase in volumes and taking cognisance of price adjustments due to the global increases in the main components of raw materials.

Mr Sebborn said encouragingly, exports grew by 149 percent and contributed 11 percent to total turnover for the period under review.

“It is also important to note that a significant portion of the Group’s revenue was recorded at the auction rate, having been received in United States dollars,” he said.

Given the global raw material shortages, Mr Sebborn said, the cost of sales rose by 48 percent from prior year.

As a result, the group posted a gross profit of $933 million compared to $515 million in prior year.

During the year under review, overheads were contained to manageable levels and as a result, the group recorded an EBITDA of $624 million compared to $442 million in prior year and profit before tax of $408 million compared to $279 million in prior year.

He said the statement of financial position remained strong with total assets amounting to $3,465 billion.

“The asset base of the group is fairly new and has been accounted for in the financial statements in terms of IFRS 13 (Fair Value Measurement).

“Directors are mindful of the need to constantly review the asset valuations in order to accurately reflect the worth of the investment in the business,” said Mr Sebborn.

He said since the new factory is now fully functional, attention had shifted towards beefing up working capital to sweat out the investment to its installed capabilities.

“To this end, borrowings for the group increased significantly with the debt to equity ratio now sitting at 16 percent,” he said.

He indicated that the current ratio closed the year on 2,21 while the group closed the year with cash and cash equivalents of $328 million.