Senior Business Journalist
Proplastics Limited says it is now focused on strengthening the group’s working capital position after its recently completed new plant and blending plant became fully operational.
The Zimbabwe Stock Exchange (ZSE) listed company manufactures and trades plastic pipes and fittings, specializing in the production of polyvinyl chloride (PVC), high density polyethylene (HDPE), low density polyethylene (LDPE) pipes ) and related fittings.
Pipes and fittings are manufactured for various applications in irrigation, water and sewer reticulation, mining, telecommunications and building construction.
The group’s chairman, Mr. Gregory Sebborn, said in a statement of finances for the year ended December 31, 2021, that demand will continue to be supported 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 optimization of the group’s working capital, especially raw material inventories, will depend on the availability of foreign currencies on the auction platform, as the current allocations are well below the needs of the company.
“The group has maintained good relations with suppliers, but there is a risk of straining them if allocations remain insufficient and payment is delayed.
“The Reserve Bank of Zimbabwe has recently provided some assurance that the auction backlog will be significantly reduced and the auction will be more responsive to market requirements,” Mr Sebborn said.
He said the group’s new 500mm line had since arrived and was already being commissioned. “This line will no doubt meet the growing demand for large diameter PVC pipe and large orders for this product have already been received prior to commissioning,” Mr. Sebborn said.
He said Proplastics is now well positioned to capitalize on some opportunities to expand its footprint in the region and efforts are underway to vet these potential initiatives in detail.
In terms of financial performance, the group’s turnover increased by 57% to 2,773 billion dollars against 1,762 billion dollars the previous year thanks to a 24% increase in volumes and taking into account price adjustments due to global increases in major raw material components.
Mr. Sebborn said encouragingly that exports increased by 149% and contributed 11% 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 US dollars,” he said.
Given global raw material shortages, Sebborn said, cost of sales rose 48% from a year earlier.
As a result, the group recorded a gross profit of $933 million compared to $515 million the previous year.
During the year under review, general expenses were contained to manageable levels and as a result the group recorded an EBITDA of 624 million dollars compared to 442 million dollars the previous year and a pre-tax profit of $408 million versus $279 million the previous year.
He said the statement of financial position remained strong with total assets standing at $3.465 billion.
“The group’s asset base is relatively new and has been accounted for in the financial statements in accordance with IFRS 13 (fair value measurement).
“Directors recognize the need to constantly review asset valuations to accurately reflect the value of the investment in the business,” Mr. Sebborn said.
He said that since the new plant is now fully functional, the focus has been on boosting working capital to optimize investment in its installed capacity.
“To this end, the group’s borrowings have increased significantly, with the debt ratio now standing at 16%,” he said.
He said the current ratio ended the year at 2.21 as the group ended the year with cash and cash equivalents of $328 million.