Turnall rolls out capex programme
BUILDING and construction materials producer Turnall Holdings Limited has embarked on a major capital expenditure (capex) programme to increase group revenue and profitability after incurring a loss in the financial year ended 31 December 2022.
The capex programme is aimed at restoring fibre cement production in Harare and introducing production of glass-reinforced plastic (GRP) pipes in order to take advantage of the fast growing local and regional market.
In a statement accompanying the financial year results, chairperson of the group Grenville Hampshire said production of inverted box rib (IBR) sheeting would be expanded and the roof tile line would be refurbished.
The group also made a significant investment in the Bulawayo plant aimed at production of New Tech fibre cement sheeting mainly for the export market.
“The board and management are confident that these investments will deliver substantial benefits including increased revenue and profitability, an increase in exports and a sustainable improvement in quality and production efficiency,” he said.
In the year ended 31 December 2022, Turnall Holdings incurred an operating loss of ZW$630.7 million in inflation-adjusted terms in the current year, which was a 145% reduction compared to the prior year. This was due to the sharp increase in operating expenses and restrained growth of the gross profit in 2022.
“The margins were under pressure due to official and alternative market exchange rate disparities whose negative impact on the cost of doing business could not always be sustainably recouped through selling price adjustments,” said the chairman.
The gross profit for the year was 31% compared to 41% achieved last year.
In addition, the group recorded a loss on net monetary position of ZW$3.1 billion as compared to a gain of ZW$308 million in the same period last year due to a 244% increase in the Consumer Price Index (CPI), consequently the group made a loss before taxation of ZW$3.7 billion.
Nevertheless, group revenue grew by 16% from ZW$7.25 billion to ZW$8.4 billion in spite of a 29% reduction in sales volumes.
Hampshire said the group spent ZW$622.5 million on capex in 2022 compared to ZW$602 million in 2021 to improve production efficiency, without borrowings.
“The company continued to invest in working capital in order to preserve value in this hyperinflationary environment. All capital requirement were funded from internally generated resources,” he said.
In 2022, the business operational environment was characterised by foreign currency shortages, a rapidly depreciating local currency and runaway inflation, which soared to 243.8 percent by December 2022 from 60.74 percent in December 2021.
Borrowing costs were prohibitive, particularly in local currency as the Reserve Bank of Zimbabwe hiked interest rates to 215% per annum to curb inflation.
Consequently, businesses had to look for alternative sources of funding to continue operations, with largely no credit terms being offered on local currency purchases by suppliers.