Future looks good for Turnall

Future looks good for Turnall
Published: 02 December 2013
The future looks bright for Zimbabwe Stock Exchange-listed building and piping products manufacturer Turnall Holdings Limited with financial analysts predicting revenue and earnings growth.

In its November research report  FBC Securities projected Turnall to register a 32 percent growth in earnings this year to $1,4 million while revenue is seen 20 percent up at $51 million. Both revenue and profits are projected at $69,7 million and $3,8 million driven by three main fundamentals namely concerted Government and individual efforts to revive construction, growth in sub-Sahara African markets and growing demand for accommodation.

Current positive strides in reviving the sector, not only by Government, but including individuals could drive sustainable growth in the construction industry in Zimbabwe, FBC Securities said.

The analysts said that the model for the roofing tiles and piping products maker portrays high organic value or offers high future economic benefits with its target being creating business in sub-Saharan Africa frontier were infrastructure development efforts are at early stages.

It said that while sub-Saharan Africa presented more economic growth opportunities subject to an array of large mineral stocks that call for vast opportunities in the extraction business, infrastructure development could attract huge attention in line with gross domestic product growth rates.

With a population of around 13,8 million people, FBC Securities said 16 percent of adults owned homes in urban areas while the rest have to pay rentals for accommodation. This implies more business opportunity as this urban adult population needs own homes to avoid high rentals.

Turnall has managed to adapt its processes to perfectly fuse in the procurement cycles creating a smooth process flow despite the challenges associated with outsourcing raw materials.

This scenario follows the closure of Zimbabwe's sole chrysotile asbestos producer Shabanie Mashava Mines In Zvishavane due to serious financial challenges forcing Turnall to import.

Turnall has also acquired new technology for the production of asbestos free roofing and piping products. This follows the set back suffered in 2011 when 44 countries across the world banned the use of chrysotile asbestos, including Turnall major export destination, South Africa.

The technology allows preparation of ingredients for asbestos free products, enabling Turnall to resume exports.

Although the contribution remains, it is expected to pick up in 2014. In trying to move away from production of roofing and piping products that contain chrysotile asbestos Turnall recently commissioned a $2,5 million tile plant with monthly capacity of 45 000 tiles.

The state-of-the-art plant has given the company a competitive edge in terms of price, turnaround time and quality, which FBC Securities contends will be key in revenue generation.

On the downside, Turnall faces competition from lower priced imports due to limited barriers to entry of imports despite the fact that it currently controls 84 percent of the domestic market share. FBC Securities also pointed out that the fact that durability and affordability complement good business has invigorated efforts by local competitors and imports to compete with Turnal.

Further, little liquidity inflows into Zimbabwe are expected to worsen the tight liquidity situation in the short to medium term, which is anticipated to dampen aggregate demand for the company.
- herald
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