We have extracted the Chairman’s Statement from the 2019 Abridged report of Proplastics Limited (PROL.zw),listed on the Zimbabwe Stock Exchange:
It is my pleasure to present to you the operational and financial results for the year ended 31 December 2019.
These results are presented in the local currency following its re-introduction in February 2019. Inflation in the country has been on the rise ever since the introduction of the local currency and as a result, the Public Accountants and Auditors Board (PAAB) assessed the environment and declared Zimbabwe as a hyperinflationary economy. Accordingly, the financial statements have also been prepared in accordance with the provisions of IAS 29, “Financial Reporting in Hyperinflationary Economies”.
The operating environment was extremely challenging during the period under review. Certain policy pronouncements made during the year relating to functional currency and exchange controls have had negative impact on the business. Since the introduction of the Zimbabwe dollar in February 2019, its value has continued to slide and this has brought economic instability and has created a difficult environment for future planning and value retention.
The introduction of the Interbank market for foreign exchange has not brought about the desired effect for access to foreign currency as this market is very limited. This has posed significant challenges as the bulk of the raw materials for the business are imported.
Demand for the Group’s products remained subdued throughout the year, mainly as a result of the difficult trading environment that the country is facing which has resulted in the erosion of our customers’ purchasing power. The non-availability of utilities, in particular electricity, for the greater part of the year, posed additional challenges. The
Group had to rely on the standby generator to keep operations running and this added considerably to production costs, with the fuel itself also being a scarce commodity on the market.
Notwithstanding the difficult operating environment, the Group still managed to post a solid financial performance both in historical and inflation adjusted terms.
The new factory is now complete and operational. The new mixing plant has been successfully installed and awaits commissioning. As envisaged when the Group embarked on this project, we expect a vast improvement in operational efficiencies thus enabling us to serve both the domestic and export markets more effectively.
Turnover for the year was ZWL 114,300,451 in historical cost terms, up from ZWL 24,091,989 in prior year. In inflation adjusted terms, turnover was ZWL 234,429,046 up from ZWL 198,087,755 in prior year. Volumes for the year declined 26% compared to the previous year. Despite lower volumes and the inflationary pressures in acquiring raw materials, cost of sales was contained within reasonable levels resulting in a Gross profit of ZWL 70,017,962 in historical cost terms and ZWL 99,345,163 inflation adjusted terms. Despite the inflationary pressures, overheads were also contained resulting in a profit before tax of ZWL 43,788,629 in historical cost terms and ZWL 81,950,992 after adjusting for inflation.
Consequently, profit after tax was ZWL 32,627,403 in historical cost terms and ZWL 52,023,514 after adjusting for inflation.
The financial position remained strong with total assets amounting to ZWL 240,399,245 in historical cost terms after the revaluation of property, plant and equipment. After adjusting for inflation, total assets amount to ZWL 310,830,195.
Total borrowings remained minimal with the debt equity ratio at 7% despite substantial outlays for the construction of the factory. The working capital position weakened as all available resources were channeled towards the completion of the factory project, which was financed fully from internal resources at the same time, ensuring that raw materials were adequate. These are notable achievements for the business. Cash and cash equivalents closed at ZWL 5,603,045.
After the successful migration to the new factory, we cleared all production backlogs by end of the first quarter. We also expect the demand for the Group’s products to improve slightly as infrastructural development contin