ZSE-listed plastic pipes and fittings manufacturer, Proplastics Limited estimates production volumes to shrink 30 percent of initial planned budget due to the scourge of the coronavirus pandemic, the company’s
Special trading update-first quarter 2020 released this morning shows.
The company experienced subdued product uptake last year of 25 percent during the first five months to May, a trend that spilled into the current trading year due to a challenging economic environment prevailing in the country and the lockdown measures put in place are set to inflict more challenges to the company operations.
Despite being given a reprieve to operate during lockdown, business has been generally low since economic activity has been halted.
“Overall, the lockdown and the pandemic will affect our volumes for the year, and we currently estimate the effect to be around 30% of the planned budget. We have not had serious disruptions on the supply of raw materials and we continued to receive supplies during the lockdown period,” the company said.
During the first quarter of 2020, demand for the Group’s products remained subdued and production temporarily suffered due to the shift into its newly completed 12 000 tonnes per annum plant in Harare.
“Sales tonnage for the quarter was 14% below the same period last year.
The quarter was also affected by the business’s migration to the new factory, a process that was only completed mid-February,” it stated.
The company also revealed that revenue contribution was below budget including prior year across the traditional segments, like Merchants, Irrigation, Local Authorities, Borehole drillers, Mining, Civils and Exports.
The month of March saw the worsening of the COVID-19 pandemic and the business had to shut down on the 24th of March 2020, as a precautionary measure.
The business afterward partially opened the factory on the 21st of April and we have since been running the operations, although at reduced levels.
Sadly, the company has had to terminate employee contracts in order to contain costs in this difficult period.
However positively, the company has since seen an improvement in purchases in United States Dollars following Government policy, through Sl 85 of 2020, to allow those with free funds to pay for goods and services in foreign currency on the domestic market.
Analysts have already predicted a contraction of around 9 percent in the local economy due to the lockdown effects but there are fears companies could take longer to recover given multiple challenges affecting the economy such as hyper inflation, high unemployment, currency depreciation, corruption and policy inconsistency among others.