Polls hit Turnall sales

HARARE - Listed asbestos manufacturer Turnall Holdings Limited (Turnall) says its sales were sluggish in the half year to June 2013 due to uncertainty created by the July 31 elections.

The group’s managing director John Jere said total sales volumes went up by a marginal 7,8 percent to 33 071 tonnes during the period under review from 30 675 tonnes in prior comparable period.

He noted that from past experience, elections had always posed challenges for the company’s sales due to indecisiveness coupled with a tight liquidity and low capacity utilisation.

“Faced with a declining demand pattern and import pressure due to weakening rand, the company came under intense pricing competitive pressure and in an effort to retain market share, margins were lowered to reflect the new reality,” said Jere, adding that as a result margins were lower than planned during the first quarter of 2013.

This comes as the building materials manufacturer posted a profit from continuing operations of $1,38 million compared to $2,48 million in the same period last year, reflecting depressed factory capacity utilisation levels which dropped to 35 percent during the first quarter.

The company generated an operating profit of $30 000 on revenue of $18,9 million representing a 0,15 percent margin compared with net income of $1,28 million against a revenue of $18,5 million in prior comparable period.

During the first quarter of the period under review, pricing margins were aligned to the market in an effort to retain market share.

“With a high fixed cost structure and lower than normal capacity utilisation, profit margins reduced significantly against a general high cost of production,” said Jere.

However, Turnall experienced a rebound in demand and improved capacity utilisation in the second quarter of 2013 which saw the business quickly re-align prices and margins in an effort to reverse the poor first quarter performance.

With an expanded product offering that enables the company to compete in all roofing market segments, a future growth in housing will see Turnall benefit from increased revenue streams unlike in the past.

Exports, coupled with pipes, remain key growth areas and robust plans are underway to buttress the two segments going forward.

The construction business has always thrived when the country is experiencing economic growth trajectory but has been severely affected due to the country’s precarious liquidity position and over reliance on imported goods.

The situation has also been exacerbated by lack of capacity limitations of financial institutions to extend capital loans to individuals for home construction.

However, Jere pointed out that the commissioning of a new roofing tile plant worth $2,5 million with a capacity to produce 45 000 tiles per day in June this year had enabled the company to respond to the demands of the market.

He added that the company traditionally anticipates 60 percent of volumes in second half 2013 and is forecasting a break-even volume and profit before tax growth for full year to December 2013.

“We hope that the post-election era will usher in positive economic growth and that in turn should see a growth in investment in infrastructure and housing.

“As a business, we believe that a growth trajectory for the economy will see us benefit in the areas of housing construction, water and sewer reticulation and an introduction of export incentives,” said Jere.

The company’s board, considering the need to retain resources for working capital, resolved not to declare an interim dividend for the half year.

 

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