Turnall Holdings (Zimbabwe) – HY22 turnover up 38% to ZWL$2.6 billion

Turnall Holdings Limited (TURN.zw) HY2022 Interim Report

Chairman’s Statement

Introduction

On behalf of the board of directors, I am pleased to present the Turnall Holdings Limited abridged consolidated financial results for the six months ended 30 June 2022.

Operating Environment

The economic environment has been challenging and was characterized by foreign currency shortages, a rapidly depreciating Zimbabwe dollar, a high level of inflation which soared to 191.6% in June 2022 as well as global supply chain disruptions as a result of the Russia- Ukraine conflict which began in February this year. The current conflict between Russia and Ukraine also triggered increases in fuel prices which, compounded with the effects of $1127 of 2021, pushed up the prices of basic goods and services and also created price distortions in the economy.

The high cost of borrowing and acute liquidity challenges resulted in depressed aggregate demand. Inevitably, organisations had to review trading terms, with credit policies being significantly revamped resulting in a skew towards a cash economy.

Financial Performance

The company posted a turnover of $2.6 billion in inflation adjusted terms which is a 38% growth compared to the prior year. In historical terms, turnover was $1.8 billion which represented a 194% growth over the same comparable period. Sales volumes declined by 29% compared to the same period last year due to a change in the sales mix which favoured high value and low tonnage products. Sales were negatively affected by liquidity constraints and subdued aggregate demand. All sales earned in USD were recorded at the auction rate from January 2022 to April 2022 and the interbank rate thereafter. Production volumes dropped by 21% compared to the previous year and this was a deliberate move by management in order to align production to the sales demand.

The gross profit margin for the year in inflation adjusted terms was 51% against the same period last year of 24%, whilst in historical terms it was 58% compared to 36% in the prior year . The improved gross profit margin is attributed to improved production efficiencies, cost containment strategies and a change in the sales mix.

Operating costs were 23% of turnover compared to 20% in the same period prior year in inflation adjusted terms. In historical terms, they were 19% compared to 18% in the same comparable period. This increase is attributed to the general price increases experienced in the economy as alluded to above. Financing costs in inflation adjusted terms were $1.25 million compared to $1.35 million incurred in the same period last year.

The profit before tax in inflation adjusted terms was $672.5 million compared to $133.9 million recorded for the comparable period last year which was a 402% increase. In historical terms, profit was $675.3 million compared to $104 million which was a 549% increase. This was mainly due to the notable improvements in the turnover value, gross margins and cost containment initiatives employed by management throughout this period.

The cash generated from operating activities in inflation adjusted terms was $861.7 million representing 159% growth compared to same period last year whilst in historical terms it stew oy 501 — close at 687 million.

The company continued to invest in working capital in order to preserve value in this hyperinflationary environment

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