Proplastics records high production cost due to lo...

Proplastics records high production cost due to load-shedding

Audrey Galawu

ASSISTANT EDITOR

Proplastics Limited encountered electricity supply challenges, which resulted in the use of expensive backup generator to ensure continuity of production.

A total of 47 days of back-up generator usage was recorded during the period, resulting in a significantly higher cost of production.

In its annual report for the year ended December 31, 2023, the group revealed a solar generating project, which was reported on at half year will be effected.

The project, according to the group will not only reduce the group’s carbon footprint but will also have a significant positive effect on the production costs as it will be fully integrated into the existing Zesa and generator supply model.

The group’s turnover for the full year grew by 22% to US$21.3 million from US$17.4 million in the prior year.

The growth was underpinned by a 22% increase in sales volumes compared to the previous year.

The contribution from the recently-commissioned new plant was significant and should continue anchoring sales volumes.

Commenting on the operating environment for the period under review, Proplastics chairman, Gregory Sebborn said the flow of business was severely affected by the loss of value of the local currency.

“The year began positively with some stability in the exchange rate and slowdown in inflation in the first quarter of the year, on the back of a relatively stable operating environment.

“The foreign currency auction floor was slow, and though the introduction of the interbank market brought some optimism at some point, this ceased to be a reliable source of foreign currency by the required amounts and the settling of the allocated amounts remained a challenge.

“As a result, the group had to rely on internally generated foreign currency to service its foreign obligations,” he said.

Exports sales recorded a 102% growth, with a contribution of 11% to total sales. The Group secured some lucrative contracts in the region some of which will continue into the new financial year.

Cost of sales rose up by 47% with gross profit margins dipping 13%, mainly on the back of reduced selling prices in the face of competitive pressures in the market as well as the aligning of costs as the business moved to a USD functional currency.

Certain elements of cost of sales, for instance electricity tariffs, rose sharply during the year under review.

Gross profit for the group was US$6.4 million compared to US$7.3 million in the prior year.

Overheads fell 4% from the prior year. Profit before tax of US$1.4 million was significantly higher than the prior year figure of US$2893 thousand.

The statement of financial position reduced slightly with total assets amounting to US$22.8 million compared to US$24.6 million in the prior year as the group used available resources to reduce its liabilities, in particular foreign obligations.