By ETimes
HARARE – Shares of Proplastics traded largely flat on Friday, even though the plastic pipe manufacturer returned to profitability in the first half of 2023.
The stock remained flat at $531.90 with a market capitalisation of $134 billion.
Proplastics has returned to profitability in H1 2023, reporting a US$561 000 profit after tax from a loss of US$723 000 in the comparative period on the back of an improved topline.
Turnover rose 23% to US$10.5 million from US$8.5 million in the prior year. This was attributed to a 19% increase in sales volumes over the same period.
“Exports contributed 15% to total sales as the group managed to secure significant supply contracts in the region,” group chairperson Gregory Sebborn said in a statement accompanying the results.
“Increasing export performance will remain a key focus area for the group.”
The company was not spared from power cuts over the period under review.
It had to rely on alternative power solutions to avoid interruptions.
“Cost of sales grew by 23% largely driven by expensive generator backup power and higher priced legacy raw materials acquired during the Covid period, and now fully utilized,” he said.
Gross profit margins remained “static”.
Proplastics recorded a gross profit of US$3.3 million, compared to US$2.7 million in a similar period last year.
The group’s cost containment measures pay off as overheads depreciated by 13% from the prior period.
Total assets stood at US$27 million.
Proplastics current ratio closed the period at 1.28.
“The gearing ratio remained very low at 1.4% as the group extinguished the expensive ZWL loans at the beginning of the year,” he said.
“The low gearing will provide some leverage as the group seeks to bolster its working capital requirements.”
It closed the period with cash and cash equivalents amounting to US$282 000.
On the other hand, the firm raised concern about the late allocation of foreign currency on the auction system.
“Foreign currency shortages remained and the backlog on the foreign auction platform persisted with disbursement coming long after the allocation,” he said.
Foreign currency is a key component of the company’s daily operations.
“On a positive note, the supply of raw materials was stable throughout the reporting period with the business having some decent stock cover.”
On a monthly basis, the company requires US$2 million for raw materials.
“Overall, the group posted a modest performance for the half year, given the challenging operating environment,” he said.
It proposed a dividend of US$0.11 cents per share.