Masimba Holdings is determined to see a profitable construction and growth at Proplastics after recording a 9% drop in sales volumes ,group CEO Canada Malunga told an analyst briefing yesterday.
"We are determined to see a profitable construction notwithstanding the poor six months outlook and growth at Proplastics buoyed by local and regional urban water supply.
"Our target is to grow the volumes and efficiencies at Proplastics and at the same time ensuring new products arising from continued innovation rises to 15%. We have seen evidence of the acceleration on improving urban water supply in 2014 and mainly funded by NGO's and public sector partners," he noted.
Malunga also stated that the irrigation business has shown steady recovery in the last three years and this year's good agriculture season will spur expansion in this sector.
The commissioning of the new HDPE plant "will buttress Proplastics strong positioning in agriculture and mining markets in Zimbabwe and the region."
'In Proplastics we see a world class and formidable regional piping systems business in two years. We have worked hard in the region and are determined to get a fair share of these markets," he added.
He noted that the telecommunications and education sectors will dominate Masimba 2014 construction order book.
Giving the operations review, Malunga indicated that their average employees went down to 1 445 from 1 620. He also expressed satisfaction about a low cost housing project they are working on.
"The low cost houses in Harare are coming off like machines. If you go there today and then go back again after a couple of days the number of units that would have come up is absolutely incredible. This project is not stopping…" he said.
Presenting on the financial highlights, group FD Michael Tapera noted the 45% increase in revenue to $62.31 million for the 18 months ended 31 December 2013 against the 12 month period ended 30 June 2012.
"Declining revenue was mainly as a result of liquidity challenges towards and post elections, lack of funding for government projects and reduced aid funding for water and sanitation projects," he said.
He further stated that savings on gross margins were due to management initiatives to improve efficiencies at sites. However, competition in the market for limited jobs is restricting margin growth through pricing.
The construction business contributed $39.97 million which is 64% to the group's turnover up from 63% while manufacturing contributed $22.34 million (36%) against 37% recorded in the prior period.
"There was more pronounced slow down on construction owing to effects of slowdown at unfunded projects," added Tapera.
He also noted that there is increased competition for small projects and increased presence of external- funded competition.
Challenges in resource deployment owing to active project size and wider distribution of smaller projects are also affecting construction performance.
However, he told analysts that the construction business recorded improved margins on prior period due to rationalisation efforts and better project management initiatives that are bearing fruit.
Tapera noted that further recoveries are expected in future from these initiatives.
Under the manufacturing business performance he noted that revenue was restricted by the subdued economic activity and liquidity crunch.
He also noted that factory efficiencies were offset by stagnant to negative pricing growth in the market.
Proplastics' sales volume decline was restricted to 9%'at 6.631 tons while HDPE volumes went up to 501tons from 385tons. New products improved by 6% against the targeted 10% while exports grew by 5% against the 10% target.
EBIDTA for the period under review went up to $3.941million from $3.126 million.
Masimba's gross profit increased to $10.73 million against $6.618 million while overheads went up to $9.410 million from $6.157 million with Tapera indicating that "overheads will continue to be sized to the environment that we face."
Tapera noted that construction GP performed better at 14% against the prior 9% which helped pull the group's performance up to 17.2%.
Manufacturing GP, however, remained stable at 23% while "very low margins at construction were due to stiff competition for contracts."
"Construction tendering margins continue to be below 10% mainly due to production and operational inefficiencies at both operating entities.
"Initiatives are under way to reduce scrap in manufacturing and enforce efficient management of project sites at construction," noted Tapera.
The group made a loss of $60 412 versus a PAT of $1.300 million achieved in the 12 months to 30 June 2012.
Giving the ratios, Tapera noted that the gross profit margins went up to 17.2% from 15.4% whilst overheads closed at 15.1% versus 14.3%.
Commenting on the significant once off items, he indicated that bad debt write offs closed at $59.922 while rationalisation cost was at $421 007.
Giving the performance for the 6 months ended December 31 he said revenue went down 30.8% to $18.35 million on comparable prior period. Meanwhile, EBITA for that period went down 53.2% to $814 845 and this was "eroded by the once off items effected at period end in 2013."
Tapera noted that the group has a "strong balance sheet" as the total assets for the decreased to $37.45 million as at 31 December 2013 against $18.97 million as at 30 June 2012.
He noted that they are exposed to government to the tune of $5.7 million and there are ongoing efforts to recover the money.
- zfn
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