HomeBusiness DigestProplastics reports 35% growth in profit

Proplastics reports 35% growth in profit

Proplastics reported a 35% growth in profits to US$652 381 buoyed by increased revenue, volume growth and an expansion in gross margins for most of the company’s products in full year (FY15) to December 2015.

Chris Muronzi

Proplastic products
Proplastic products

Gross profit grew by 15% to US$3,2 million owing to an improved gross profit margin.

The gross profit margin improved to 23% from 21% in the prior year.

CE Kuda Chigiya said the company was in fy16 looking at capital restructuring and improving efficiencies.

“As we go into 2016, we are going to be looking at capital restructuring, inventories, equipment and human capital to get the return we want. We are going to focus on our plant efficiencies and utilisation.

Exports are another area of focus. Ideally, it should be 10%.

While exports have been covered by Paschal, they were concerted efforts in the last quarter of last year and we actually picked up some good numbers in Zambia,” Chigiya said.

He said the company was relooking at its credit ratio going into the future.

“We are looking at volumes growth and our cash business model. The cash to credit ratio has to change from where it is. We want the rate on a 50/50 basis and improve it on a quarterly basis. This has to change considering the risk that is in the market,” Chigiya said.

Currently 60% of Proplastics sales are through 60 days credit terms.

A tough economic environment had an effect on the group’s performance as demand for some of the firm’s products was hampered by lack of significant infrastructural development in the country, the company said.

In the same period, overheads grew 16% as a result of once off costs attributed to unbundling costs.

Raw materials made up the bulk of the overheads at 54% while cost of sales was also the major contributor.

“A few once off items such as staff rationalisation and charges from the unbundling contributed to the overheads,” he said.

Proplastics was spun off from Masimba Holdings Ltd last year.

Chigiya said although the exercise is set to continue in the current financial year, the cost will be 10% of last year’s.

Last year, Proplastics spent US$100 000 on staff rationalisation.

He said the company had since dollarisation spent US$8 million on machine modernisation.

“There is going to be continued spending going forward, but it’s not going to be on the same scale as the past few years.
We are going to do a capital rationalisation programme. From that, we will either scale down from such units or dispose all together,” Chigiya said.

FD Paschal Changunda said short term borrowings valued at US$750 000 had been converted to long term loans bearing a total 8% annual interest rate.

The initial cost of the funds was around 11% per annum before the rescheduling.

Of the US$750 000, a total US$225 000 is due, Changunda said.

“We have converted US750 000 to a 3-year term loan at 8,5% all in with a local bank,” Changunda said.
“The outlook is very positive.” he said.

The company said it was looking at PPP.

“We have seen some donor money coming into the economy. World Bank, UNICEF and World Vision have invested in the municipality water treatment and we have seen Proplastics getting some mileage from that,” said
He said the export volumes augmented efficiencies.

Chigiya said his company did not have any exchange risk as orders and sales were denominated in US dollars.
“The margins on exports are not huge,” he said.

Recent Posts

Stories you will enjoy

Recommended reading