CONTRACTING firm Masimba Holdings Ltd (Masimba) sees a strong performance in the second half of 2014 mainly buoyed by the company’s manufacturing division, Proplastics.
In the first half of the year ended June 30, Masimba reported a 22% decline in revenue to US$13,6 million compared to US$17,4 million in the same period last year due to a generally depressed economic environment, according to FD Michael Tapera.
The revenue slump resulted in US$344 390 loss after tax for the half year compared to a US$98 925 after tax profit performance in the first six months of 2013.
Tapera said the competitive pressure, arising from the liquidity challenges, had a downward pull on revenues for the half year ended June 30, 2014.
“We have had to fight for jobs (contracts) at whatever costs in some instances,” he said.
Masimba CEO Canada Malunga said the business has already acquired new equipment, to be commissioned mid- September, and hopes to drive manufacturing volumes after introducing new pipe varieties.
“We believe the second half will be stronger mainly driven by Proplastics. Construction will be slower but with growth prospects,” said Malunga during the half year briefing.
He said the company was pursuing partnerships with Chinese competitors in the highly competitive environment that has seen a number of manufacturing companies going under due to the influx of imports which are often cheaper. Malunga also said the company has significant potential revenues coming from the telecoms sector where it is currently working across all network providers.
In a statement attached to the company’s financial results, Masimba chairman Gregory Sebborn said manufacturing contributed US$5,8 million , a figure representing 43% of the group’s turnover compared to US$6,1 million or around 35% of turnover in the same period prior year.
“The increase in manufacturing contribution to group turnover highlights the buoyancy of the unit against a more pronounced slow performance experienced in the construction unit,” he said.
Proplastics, Sebborn said, maintained gross profit margins at 21%.
“Sales to merchants, a recovering irrigation sector and direct civil construction projects, buoyed by housing developments were the key sources of revenue,” Sebborn added.
However, the company’s decision to manage credit risk by putting more customers on cash terms restricted volumes growth.
Exports for the period stood at 6% below group targets of 10%, according to Malunga.
Masimba’s contracting revenue for the period fell 32% to US$7,7 million or 57% of gross revenues compared to US$11,4 million 65% of gross revenue prior period.
The drop in contracting revenues was attributable to a slowdown in large scale projects as government lacks funding and is currently struggling to clear its debts.
Malunga said currently, Masimba was owed US$4, million by government after part payment of about US$1 million since January.
The construction order book currently sits at US$41 million comprising US$19 million which is inactive due to funding problems.
Between now and December 2014, the active order book sits at US$8, 6 million.
Contracting gross profits margins improved to 15% from 12% same period in 2013.
During the period under review, the group disposed of low yielding investment properties with a book value of US$470 000 and proceeds applied towards reducing group borrowings which closed the reporting period a US$2,5 million.
Malunga said the remaining book on the property portfolio was US$4,6 million and would be disposed if the company finds the right buyer at the right price.