NTS Reports 36% Sales Drop

Audrey Galawu

Assistant Editor

National Tyre Services Limited has reported a significant 36% decline in sales for the half-year ended 30 September 2024, with revenue falling to ZWG$37.6 million from ZWG$58.8 million in the same period last year.

The decline comes amid supply chain disruptions and the weakening of consumer purchasing power due to inflationary pressures.

Despite the drop in revenue, the company recorded a marginal 2% increase in gross profit to ZWG$12 million, up from ZWG$11.8 million last year. However, foreign exchange movements led to a pre-tax loss of ZWG$36 million, widening from last year’s ZWG$35 million loss.

The challenging operating environment played a key role in the sales downturn. The government’s introduction of a gold-backed local currency, aimed at stabilizing the economy, initially showed promise. However, the parallel market exchange rate resurfaced, leading to renewed inflationary pressures.

"The introduction of a new local currency was the major highlight of the first six months of our financial year... However, the parallel market exchange rate resurfaced towards the end of the first half of the year, making it difficult for businesses as inflation emerged, further eroding consumer purchasing power," NTS said in its abridged financial statement.

In response to these challenges, the government devalued the currency by 43% to maintain its relevance in the market. However, this has done little to alleviate the economic strain on businesses and consumers alike.

While overall sales declined, one segment showed resilience. The light truck tyre category grew by 67% compared to the same period last year, driven by strong demand from drought alleviation programs and government-backed infrastructure projects.

Additionally, the company's retreading operations maintained steady performance. "Our factories continue to produce highly competitive, quality retreads while maintaining good turnaround times," the company noted.

NTS managed to reduce total operating expenses to ZWG$19 million, down from ZWG$24 million in the previous year. Despite cost-cutting measures, the company opted not to declare a dividend, prioritizing working capital enhancement instead.

"The Directors have considered it prudent not to declare a dividend in consideration of the need to enhance working capital in the business," the company stated.

Despite current economic difficulties, NTS remains cautiously optimistic about the future, particularly due to a promising agricultural season.

"We are cautiously optimistic of a better business operating environment supported by a promising farming season ahead, a development that is expected to significantly boost agricultural production," the statement read.

To counter supply chain disruptions and improve product availability, the company has resumed direct procurement of budget brands from China.