Turnall Holdings Limited has been in a loss-making position since the beginning of the year owing to increased costs, it has been revealed.
The firm said the increased costs were due to a challenging economic environment characterised by liquidity constraints, adverse effects of the El Nino-induced drought and pricing distortions arising from exchange rate distortions.
In its trading update for the third quarter ended September 30, 2024 released on Friday, Turnall said cumulative sales volumes for the nine months of the year were 5% above the same period last year.
“Similarly, the cumulative sales revenue was US$8,8 million, which was a 5% growth from the same period last year and this was driven mainly by fibre cement products’ availability,” Turnall said.
“The gross margin for the third quarter was 19% against a prior year figure of 16% and the improved margins are mainly due to the change in the sales mix as the group enjoys higher margins on the fibre cement products.
“However, in spite of the ongoing cost containment initiatives, the group’s expenses increased by 19%, thereby eroding the benefits of the improved gross margin.
“Consequently, the group has been in a loss-making position since the beginning of the year.”
According to the update, the sales revenue for the quarter was US$3,3 million which was a 6% growth compared to the same period last year.
“The revenue growth is attributed to a change in the sales mix, which was skewed towards the high value and low tonnage products,” Turnall said.
“Consequently, the sales volumes for the quarter were 8 537 tonnes, which was 7% lower than the same period last year (9 132 tonnes) due to the change in the sales mix.”
However, the firm recorded a notable improvement in cash generated from operations compared to the same period last year.
“Despite the losses recorded year to date, the business had positive cashflows generated from operations amounting to US$985 967 up from -US$6,9 million last year,” Turnall said.
“Net cash inflows from financing activities amounted to US$1,6 million and this was mainly driven by loans received from the shareholders and financial institutions, which were used to fund working capital and civil works for the fibre-cement plant which will be installed in Harare.”
Turnall revealed that the installation of a new sheeting plant in Harare would boost overall output.
“Currently, civil works are ongoing in preparation for the installation of a new sheeting plant in Harare which will boost output, lower production costs and result in significant cost savings particularly in respect of transportation costs,” Turnall said.
“The roofing tiles plant capacity is also going to improve through the injection of additional tile templates in the 4th quarter of 2024.
“Progress has been made in improving the operational efficiency of the Tile Plant and further gains will follow when the new templates arrive.”
The firm revealed that there were deliberate strategies being implemented to improve the product offering to grow revenues.
“Enhancement of production efficiencies and cost containment remain key focus areas as well for management and these efforts are starting to bear fruit.
“We remain committed to turning the Group’s fortunes around and restoring it to profitability,” Turnall added.
In June, the firm revealed plans to target the regional export market and ploughed US$2 million to upgrade its Bulawayo plant to upscale production towards this endeavour.
“The Reserve Bank of Zimbabwe devalued the local currency by 43% in a bid to reduce pricing distortions in the economy and this represents a substantial shift in the country’s economic strategy, and it is expected to have profound implications for businesses and consumers alike,” Turnall said.
“The central bank also announced various measures which include increasing bank interest rates from 20% to 35% and allowing exchange rate flexibility.
“The latter could lead to an improved valuation of the ZiG and could potentially reduce arbitrage opportunities.”