NTS survives harsh operating climate

Own Correspondent

MANUFACTURER of retread tyres and distributor of major tyre brands, National Tyre Services, (NTS) trudged on with business during 2004 amid the challenges prevailing within the industrial-m

otor sector.


Of particular note was the 16% overall increase in volumes for the year-end, a figure which the company deems as excellent.


If we look back to the second quarter of the financial year, there were significant increases in passenger, light truck, earthmover and agricultural tyre sales, giving a volume increment in core business activities of 13%.


During the same quarter, retread and relug activities also improved though it seems it faltered somewhere along the way to year-end where it recorded an overall negative volume growth.


In inflation adjusted terms, revenue declined by 22% from $202,7 billion in 2003 to $157,7 billion as a result of deflationary pricing pressures. However, profit attributable to shareholders rose by 47% to $4,09 billion in 2004.


It is interesting to note that for the half-year they had a loss attributable to shareholders of $1,3 billion illustrating the expectation that performance is better in the second half for most companies. Earnings per share (historical) leaped by 102% from $34,48 in 2003 to $69,75 and a final dividend of $8,50/share was paid out up from the previous year’s $4,50.


Their capital expenditure increased from $6,9 billion to $11,999 billion believed to have been utilised in the purchasing of properties in Bindura and Mutare, upgrading premises, a fleet of vehicles during the second quarter and other crucial assets like generators to aid in instances of power failures which were common in 2004. Acquisition of a new machine, anticipated to arrive soon should enhance retreading activities within the business.

Way forward for NTS?


Looks like they will have to buckle up in efforts to ward off competition from the service repairs side, namely local service stations and backyard industries.


I think their intentions to expand on marketing tactics are necessary. They have already merged the Mvurwi/Bindura and Kadoma/Chegutu branches in an attempt to maintain viability levels and consistency of supplies.


If business in the sector continues to be harsh during 2005, we may witness

more mergers and closures in the smaller towns.


On consumer inflation developments, year-on-year inflation figures increased to 133,6% from 132,7% following an increase in month-on-month food inflation ahead of harvests.


January m-o-m rose beyond the expected 6,8% to 14,1%. For meat, m-o-m was pegged at 12% and for fruit and vegetables-16%.


However, annual food inflation dropped from 121,1% to 110,7% in January. Non-food inflation for January increased to 17,4% from 4%.


The fuel, power, rent and rates category increased to 45,3% m-o-m believed to be brought about by the rent and rates components.


We begin to wonder whether we are going to attain the 90% inflation level in June this year although most economists are sceptical about this. I however think we will be able to touch the forecasted 70% overnight interest rates.

Some still say that despite the slowdown in money supply during 2004, monetary expansion remains too high to achieve lower levels of inflation. —


*Any opinions expressed reflect the current judgement of the author(s), and do not necessarily reflect the opinion of Sagit Financial Holdings or any of its subsidiaries and affiliates.