TURNALL Holdings Limited recently managed to tie up US$8 million worth of deals with South African construction companies, raising expectations that the firm will be able to dig itself out of the current financial rut.
The listed roofing and building products manufacturer has of late suffered from slowing demand from the local market. Both the private and public sectors are not investing in major infrastructural projects as the liquidity crunch continues to stymie local economic growth.
Turnall managing director Mr John Jere told The Sunday Mail Business last week that the company has been awarded a contract to supply pipes, paves and concrete tiles for more than 10 000 houses in South Africa.
“The company has been awarded a contract to supply building material into Carolina and some other parts of South Africa for about 10 950 houses and the value of that business to Turnall is about US$8 million . . .
“The project is divided into phases and the first 1 000 houses covered are worth US$800 000. There are quite a good number of projects that we have been contracted to do around South Africa in areas that include Cape Town, KwaZulu-Natal and Mpumalanga,” said Mr Jere.
It is believed that the company will be able to return to profitability in the current fiscal year after recording a US$2,6 million loss for the year ending December 31, 2013.
Mr Jere noted that an illiquid market is largely affecting the viability of its tiles business. However, Turnall is now deliberately focusing on spreading its tentacles into regional markets that are offering better growth prospects.
Deals in South Africa and Mozambique are forecast to double exports this year.
In the year ending December 31, 2013, the company reported that exports grew by $1,6 million from a year earlier.
Mr Jere added: “We see potential of growth through a strengthening of demand in roofing tiles, pipes and paves in the export market.
“The products are coming from the plant that we commissioned in September (last year) and we are actually seeing those contributing close to US$7 million in 2014 . . .
“The recently installed non-asbestos plant in Bulawayo will be distributing products into South Africa for the contracted projects, we have also opened offices and warehouses in the country (South Africa) that are involved in retail business.
“Payments are going to be upfront and we expect to realise about US$2 million operating profit from that office in 2014.”
Apart from direct exports to construction firms, Turnall has also opened a retail division in South Africa to sell its products.
In order to minimise exposure from defaults and punitive interest rates, the company has also decided to adopt a cash model payment system and to cut back on lending.
No meaningful contribution is, however, expected from the fibre cement and asbestos business as local demand continues to decline.
“For the fibre cement or asbestos business, which is the core of our trade, we are not expecting growth but rather stagnation or in the worst scenario going down by about 5 percent this year, which is a same level of decline as that registered last year,” explained Mr Jere.
Both Turnall holding plants in Harare and Bulawayo have a potential to produce about 45 000 tiles each per day. However, the company had since reduced production to 30 000 owing to subdued demand.
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