The Sunday Mail
Turnall is now on the mend
TURNALL, a listed fibre cement products manufacturer, is confident of a profitable half-year and year-end financial position as volumes continue to meet expectations.
The company is mainly being buoyed by a significant reduction in critical raw materials and logistical inefficiences.
In a recent trading update at the company’s annual general meeting, Turnall’s managing director Mr Caleb Musodza said the year had started on a positive trend in line with the three-year strategic plan, with the first quarter volumes being on plan and significantly ahead of the corresponding period in 2014.
“Volumes for the first quarter are on plan and significantly ahead of prior year by 29 percent, an indication that Turnall is turning the corner from a loss-making position.
“We have reviewed our procurement systems for cost effectiveness, cashflow effectiveness and logistics efficiency, mainly by negotiating for a 20 percent reduction in fibre costs from our Russian supplier,” said Mr Musodza.
Year to date, the company is profitable despite this period being traditionally a low activity period for the company.
The period from August to December every year is normally Turnall’s peak period. The company has also skewed its trading model towards cash trading.
According to Mr Musodza, the company has addressed profitability issues on exports, which are expected to spur the fibre cement company to further growth as it diversifies to address the risks facing the domestic market. It is believed that strong growth in both export and domestic market demand will likely improve the firm’s performance.
Cost-cutting measures are continuing.
Expenses are now 23 percent lower than the same period a year ago.
Turnall’s traditional export market has been South Africa, but it has recently taken a strategic position to consolidate the export market with the inclusion of Zambia, Mozambique and Malawi. Initial loads have already been shipped to the three countries and demand is expected to remain firm.
Added Mr Musodza: “Procurement savings realisation of 20 percent in fibre, in addition to spares and services, will drive profitability of the company.
“Management is exploring working capital funding options to scale up operations and speed up the turnaround plan.”
Turnall’s bullish projections represent a marked turn in fortune for a company whose loses widened to US$12 million in the year ended December 31, 2014 from US$4,3 million recorded a year earlier.
Revenues in the period dropped to US$34 million from US$42 million in the corresponding year-ago period as the operating environment continued to be affected by falling aggregate demand, liquidity constraints and poor funding of infrastructural projects which necessitated a complete strategic shift in the business model.
In the year under review, the volume of sales of all products fell to 69 000 tonnes from 78 000 tonnes in 2013.
Capacity utilisation also averaged 40 percent.
