Proplastics posts losses in Zimbabwe’s challenging operating environment

Proplastics Limited, a leading manufacturer of plastic pipes and related products, has reported a loss of US$71,875 for the half-year ended June 30, 2024, citing a challenging operating environment.

The Zimbabwe Stock Exchange (ZSE) company’s revenue declined by 18% to US$8.58 million, while gross profit fell by 25% to US$2.49 million.

According to the company’s unaudited condensed consolidated interim financial results, the challenging operating environment was characterised by exchange rate volatility, severe power outages, depreciation of the local currency, and the adverse effects of the El Niño-induced drought.

Proplastics Chairman, Gregory Sebborn, attributed the decline in performance to subdued demand for the company’s products, which saw sales volumes decrease by 8% compared to the prior period.

Export sales contributed only 19% to total sales due to risk and competitive issues.

Profit before tax of US$418 thousand was 58% below the prior period amount of US$1.1 million. EBITDA was at US$1 million, down from US$1,5 million in the prior period.

“Resultantly, the business was in a loss position of US$72 thousand after accounting for normal and deferred tax,” Sebborn noted.

Despite the challenging environment, Sebborn expressed optimism about the company’s prospects for the second half of the year.

“Government and non-government agencies are introducing measures to mitigate the effects of the drought through drilling of boreholes and setting up community-based irrigation schemes, which has a positive impact on the demand for our products,” he said.

The company said it has implemented initiatives to recover in the second half, including the installation of additional equipment to augment current capacity and factory efficiencies.

According to Sebborn, the completion of a solar plant is also expected to generate significant savings, with the business set to produce about 50,000 kilowatt-hours (kWh) of energy per month.

“With the installation and commissioning of the solar plant now complete, the business is expected to generate about 50,000 kilowatt hour (kWh) of energy per month thus reducing electricity bill and generator fuel consumption.

“This will result in significant savings which will be reflected in the second half of the year,” Sebborn further stated.

Due to the challenging operating environment and performance, the Board has proposed that no interim dividend be declared.

Proplastics expects the operating environment to remain challenging due to liquidity constraints and the continuing effects of the drought.