FBCH projects Turnall turnaround

HARARE - Listed diversified group FBC Holdings (FBCH) says it expects its loss-making roofing materials manufacturer Turnall Holdings (Turnall) to return to profitability by year end.

John Mushayavanhu, FBCH’s chief executive, recently said Turnall’s performance was below expectation, prompting the group to change its business model from a credit sale approach to a cash sale approach.

“Customers were put on a cash upfront basis.

“Initially, there was resistance in the market to this new business model and therefore sales volumes suffered in the first quarter,” he said, adding that, however, “volumes have picked up as most customers have since run down their stock levels”.

“We are therefore anticipating Turnall to make a loss in the first half of the year 2014 and to return to profitability in the second half of the year,” he said.

Turnall’s losses widened to $3 million in the year to December from $1,2 million in the prior year due to bad debts, forcing the company to shift to a cash trading model.

Recently, it launched a new product range called Ravenna which will create a new revenue stream for the company as well as employment.

Mushayavanhu noted that the product diversification will enable the business to compete very well against the four manufacturers in the market.

This comes as Turnall Holdings registered a 17 percent decline in sales to 16 000 tonnes for the four months to April after facing customer resistance to its new cash only policy.
John Jere, Turnall managing director, recently told shareholders at the company’s annual general meeting that the switch from credit to a cash payment system in February was initially met with resistance by customers hence the decline in sales, although there has been an improvement of late.

“We have actually seen volumes trending upwards starting April and May,” he said.
Gross profit margins were also lower than last year while turnover stood at $7,5 million.
Jere said the company had managed to unlock $2,2 million in net working capital from trade and other receivable goods which had shown a reduction of $4,6 million.

Capacity utilisation was down to 45 percent compared to 55 percent in the same period last year while the debtors book had been reduced to $13 million from $17,5 million last year.

“The thrust is to reduce this number and we hope that this number will be $10 million or below by end of the year,” Jere said.

The company’s loans and borrowings stood at $8,7 million after paying creditors $800 000 but has targeted to lower the figure to $3 million by end of year.

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