Proplastics Limited Achieves 22% Turnover Increase in 2023 Despite Rising Production Costs

Published On: May 29, 2024Company: Proplastics Limited (PROL.zw)
Question: What steps has Proplastics Limited taken to adapt to the economic instabilities in Zimbabwe in 2023?
Answer: In response to economic instability, Proplastics Limited changed its functional currency to USD. They also relied on internally generated foreign currency to service their obligations. The company adapted by proposing and initiating a solar generating project in anticipation of persistent electricity issues. This project is meant to reduce production costs. Additionally, they commissioned a new plastic tank manufacturing business, which is anticipated to contribute positively to their volumes and profitability.

Summary

  • Proplastics Limited changed its functional currency to USD, effective from 1st January 2023 after monitoring the determinants over the last 3 years.
  • The economic environment in Zimbabwe was unstable in 2023, with volatility in the exchange rate and slow foreign currency auction floor.
  • The Group relied on internally generated foreign currency to service its foreign obligations due to the unreliability of the interbank market.
  • The company recorded higher production costs due to recurring power outages and subsequent use of backup generators.
  • The company’s turnover for 2023 rose by 22%, to $21.3 million from $17.4 million the previous year.
  • Export sales recorded a 102% growth contributing 11% to total sales.
  • The cost of sales increased by 47%, leading to a dip in gross profit margins of 13%.
  • Gearing ratio remained stable at 1.5%, leaving room for the Group to leverage on borrowings to fund operations.
  • Economic outlook remains subdued with anticipated drought negatively impacting economic performance.
  • The new plastic tank manufacturing business commissioned in 2023 is likely to perform positively.
  • A forthcoming solar generating project seeks to mitigate current electricity issues and reduce production costs.
  • No final dividends will be declared due to the need to conserve cash and the subdued performance for the year.

Useful links

About Proplastics Limited (PROL.zw)

Proplastics Limited manufactures and markets plastic pipes and fittings, specialising in the production of polyvinyl chloride (PVC), high-density polyethylene (HDPE), low-density polyethylene (LDPE) pipes and related fittings. The pipes and fittings are manufactured for various applications in irrigation, water and sewer reticulation, mining, telecommunications and building construction. Proflo is responsible for the supply of PVC pressure pipes and fittings, and polyethylene pipes and fittings, which includes injection molded fittings, fabricated fittings and ball valves. Prodrain supplies sewer pipes and fittings, soil vent and waste pipes and fittings, borehole casings, electrical conducts and cable ducting and gutter systems for rain water. Proplastics Limited is listed on the Zimbabwe Stock Exchange

Giri, AfricanFinancials’ Artificial Intelligence (AI) Analyst, sourced this article from the attached or linked document. We cannot guarantee the accuracy or completeness of Giri’s article and we disclaim any liability arising from reliance on information provided in the article. This article is not a recommendation to buy or sell the securities mentioned therein and should be read in conjunction with the original PDF or link to this article. Other sources should be consulted for verification and additional context. Please seek investment advice from an authorised stockbroker or advisor.

Giri

Giri, our AfricanFinancials AInalyst, was born in 2006. She publishes investor, ESG, sustainability and corporate earnings reports of our African stock exchange listed companies simply and quickly, so investors have a view of investment value and opportunity.

She sticks her neck out by telling companies' stories plainly to retail and professional investors looking to better understand investing in African stock exchange listed companies. She helps retail investors, analysts and researchers find lower for lower risk investments at higher returns.

So "See the bigger picture" by reading her top-down views. Go long on African equities. Invest for higher returns. Stay on top and tower above the rest.

Related articles