NATIONAL Tyre Service (NTS) Limited’s profits before tax dropped 20% to $472 820 in the half-year ended September 30 attributed to intense competition and an increase in overheads among many other challenges.
According to the company’s financial statement released recently, operating profit in the period went down to $472 820 from $593 493, 45 recorded in the same period last year partly due to a drop in revenue as the liquidity crunch continues to bite.
Revenue dropped by a percentage to $8,4 million which the company attributed to the difficult operating environment and an increase in operational costs.
“Combined with a 4% increase in overheads costs, profit before tax declined by 20% in comparison to 2012,” said the company in a statement.
“Revenue declined 1% over the prior comparable period due to few trading days, a sales mix skewed towards lower value products, reduced effective demand in a crowded market space and stringent debtors management.”
The company said also due to the difficult operating environment basic earnings per share declined by 27% to $0,14 down from $0,19 achieved in the same period last year.
However, NTS said despite the difficult operating environment, the off-road tyres’ contribution to revenue increased due to focused marketing efforts in the mining sector.
Retreading volumes also grew by 8% as the market responded to the reopening of the company’s Bulawayo factory last year although further growth was hampered by the shortage of good quality casings.
The company failed to declare a dividend in the period owing to the prevalent liquidity crunch.
“There is still need to conserve cash in light of the prevailing macroeconomic environment and consequently no interim dividend has been declared in respect of the half-year period ended 30 September 2013,” said the company.
Industry in general is in the doldrums after capacity utilisation plunged to 39,6% largely due to the shortage of working capital and antiquated machinery.
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