National Tyre Services Limited (NTS) announced a profit-after-tax of ZWL$ 35.3 million in its Half-Year trading update to September 2020 on account of improved tyre production, exchange rate gains and cost containment efforts.
The Company recorded a 17 percent increase in new tyre unit sales as compared to last year although in monetary terms, sales for the period were 21 percent below the previous period in inflation adjusted terms at ZWL 189.8 million.
However, this was to be offset by strong performances in other revenue streams, made up largely of rental income and foreign currency exchange gain, at ZWL 14.2 million.
“Improved profit margins were realized on all product and service lines. That coupled with cost containment measures implemented by management, resulted in an after-tax profit of ZWL 35.3million in inflation adjusted terms,” said NTS chairman Rutenhuro Moyo.
The company had increased cost-effective production up-time due to more frequent availability of electricity and fuel over the first half of the financial year.
Access to foreign currency through the Reserve Bank of Zimbabwe auction system which was introduced in June 2020 also improved and resulted in stable prices.
“These developments, coupled with the support from our bankers, impacted positively on the business and resulted in increased inventories which in turn drove sales levels up. This was achieved despite the negative impact of the COVID-19 pandemic,” said Moyo.
Business was interrupted when retail branches closed in April and May 2020 following government’s directive to curtail the spread of Coronavirus.
Once re-opened, business was affected by the restrictive lockdown measures, which impacted production and trading hours as well as access to suppliers.
Retreading operations were negatively affected by lockdown closures as the company’s largest customers, the fleet operators, struggled to return to normal business during the period under review.
Despite posting a healthy profit margin, the company directors did not declare interim dividend for the half year citing the need to conserve working capital and reinvest in building inventories for peak period.
