Proplastics loses US$3 million to power cuts

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PIPING products manufacturer, Proplastics, says it lost at least US$3 million to power cuts after its operations lost 28 days of production owing to load shedding and faults.
The group’s chief executive, Kuda Chigiya, told The Financial Gazette on the sidelines of the company’s annual general meeting that production volumes for the five months to May 31, 2023 dropped by 17,5 percent below prior levels due to electricity shortages.
“In monetary terms, that’s between US$2,5 million and US$3 million equivalent for those 28 days of production because, in a normal month, we only run for about 22 days, so 28 days are actually more than a month of normal production,” he said.

Although the economic environment has been unsteady since the start of the year, he said it has been more so in the past two months.
“The economic volatility is creating uncertainties in the trading environment. Naturally, this affected demand for the company’s products as most projects slowed down.”
The market continues to indicate a preference for US dollars as a method of settlement over the local currency. The company’s revenues remain heavily skewed towards the US dollar at a ratio of 70:30 to ZWL.
“Our ideal US dollar component that we want in the business is about 90 percent and 10 percent has to be RTGS just to cover local operational costs. This will help us pay foreign creditors that have extended terms to us,” Chigiya said.
“On a monthly basis, the company requires US$2 million for raw materials. The firm sometimes took part in the foreign exchange auction, with allocations totalling $1,1 million thus far and $820k being paid out. At our current ratio of 70 percent, we are not able to meet all our financial obligations monthly, especially the foreign ones.”
He said the company would not spend much on capital expenditures for the remainder of the year.
“For our capital expenditure for the remainder of the year, we are looking at just under US$1 million. We have already invested enough in the new factory and utilisation is about 56 percent,” he said.
“So, we are looking at sweating the capital that we have sunk in that factory, so that’s the amount that we are looking at for the remainder of the year.”
Proplastics’ sales volumes for the five months increased by 14 percent compared to the same period last year while sales revenue also went up by four percent compared to the same period last year. Export sales grew by 77 percent. Overall contribution to total sales was 15 percent, compared to 9 percent for the same period last year. The group’s target for exports remains at 10 to 15 percent of total sales.
Chigiya said the business had more than two months’ worth of essential raw materials at hand.