NATIONAL Tyre Services (NTS) has reported average capacity utilisation of 50% for both its Harare and Bulawayo factories in the first quarter to June 30 2012.
Report by Staff Writer
Zimbabwe’s manufacturing has been struggling to get out of the doldrums since the end of the hyperinflation era and the subsequent adoption of the multicurrency system.
NTS chief operating officer Tawanda Choto told the company’s annual general meeting recently the business had experienced growth, though at a decreasing rate because of the current economic challenges that have seen the economic growth rate forecast for this year being revised downwards to 5,6% from 9,4%.
The NTS group’s revenue in the first quarter to June rose by 17%, a figure Choto said was in line with budget. He said there was growth in units, adding margins maintained the same percentage as of the same period last year.
While the company’s average capacity utilisation was 50%, the Harare operations were at 80% capacity, much higher than the Bulawayo factory.
Retreading operations had been moved to Harare from Bulawayo. The Bulawayo factory was re-opened in a bid to improve turnaround time for customers in the southern region and to decongest Harare.
Choto said measuring market share in tyre sales was difficult and the group had no idea what its share of the market was. Therefore, the company had commissioned a research company to find out. However, NTS’ market share of retreads was around 30-35%.
Choto noted that although there were no reliable figures on the number of cars on the country’s roads, it was evident that this had gone up significantly, which also meant that competition in the tyre industry had also increased as there were a few barriers to entry.
The group intends to expand its distribution network through service centres in strategic and high traffic volume areas. Overall, the company will continue with the volume growth business model backed by differentiated service.
In the year to March, NTS reported a 72% growth in operating profit, helped by productivity enhancement initiatives and strategic cost management.
Operating profit in the period rose to US$888 999, up from US$516 184 recorded in the comparable period in 2011. There was increased pressure on overheads, including high electricity tariffs, increases in distribution costs, wage pressures and facilities and plant refurbishments.
NTS’s topline revenue of US$15,9 million was 41% ahead of the US$11,3 million recorded in the prior year. The company attributed its better performance to a more efficient supply chain management system, a wider distribution footprint and increased brand awareness. Visibility was also boosted by NTS-differentiated service offering.
Attributable profit was US$844 642, resulting in earnings per share improving by 27% to US$0,33 cents from US$0,24 cents recorded in the previous year.
The improved profitability translated into stronger cash flows, which rose to US$524 427 from US$97 842 brought forward from the previous year. Strong growth in contribution of high value truck and off road vehicle tyres pushed volumes of new tyres in the retail and services by 17%.