Second quarter rebound sees Turnall in near break-even

By Happiness Zengeni, HARARE, August 21 (The Source) – A rebound in demand and an improvement in capacity utilisation in the second quarter to June saw Turnall report an interim profit at the operating level.

Chief executive John Jere told analysts on Wednesday that the performance in the first six months of the year was a tale of two quarters. The first quarter was difficult as prices and margins were aligned to market in an effort to retain market share. This resulted in a huge burden for group as the fixed cost structures were high while there was lower than normal capacity utilisation.

“Profit margins in the first quarter reduced significantly but the group was able to turn this around in 2Q13.”

The company reported revenue of $18.9 million, which was two percent above last year’s $18.5 million. Operating profit was down to $1.377 million from $2.47 million last year.

Gross profit margin at 23 percent was lower than the 30 percent achieved in 2012 mainly because of the lower than plan pricing during the first quarter. Jere said as a result the operating margin was affected at 7 percent versus 16 percent last year.

“This performance also reflected generally poor factory capacity utilisation.”

The group reported a $30 000 pre-tax profit representing a margin of 0.15% on the topline. Net finance charges were $1.34 million compared to $1.2 million last year.  This resulted in a loss of $111 875. Management was hopeful this would be reversed by year end.

Jere said the group had also commissioned a tile making plant which does about 45 000 tiles a day while a paver will be installed before year end.

Jere said the post-election era should usher in positive economic growth and that in turn should see a growth in investment in infrastructure and housing.

“As a business we believe that a growth trajectory for the economy will see the group benefitting in the area of housing construction, water and sewer reticulation.”