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Senior Business Reporter
BUILDING materials maker, Turnall Holdings Limited, says it will focus on scaling up the contribution of its non-asbestos arm to diversify risk by targeting domestic and exports markets.Board chairman Herbert Nkala said in an audited financial report for the year ended December 31, 2014 that management had embarked on a robust business turnaround plan.

He said the board was confident the loss making  firm would achieve profitability this year and  beyond.

“Significant improvements in margins are expected before the end of first half of the year mainly coming from procurement savings and improvements in production efficiencies.

“The company will scale up the contribution of non-asbestos portfolio to diversify risk, with both domestic and exports markets being targeted,” Nkala said.

He said the plan addresses procurement deficiencies, production efficiencies, business diversification, working capital management and cost containment.

The roofing and building products manufacturer targets to increase production of non-asbestos roofing sheets for export markets to 1,000 tonnes per month by year end as the company seeks to regain lost market share.

Nkala said building blocks for a non-asbestos business were firmly in place, driven by concrete products, galvanised iron sheets products and non-asbestos fibre cement products.

He said the new strategy had started bearing fruit as the company had recorded profits in the first two months of 2015 against a historical trend where the business had always recorded losses in the first quarter.

“The company’s order book remains strong and the factories have the capacity to fulfil the market requirements,” added Nkala.

He said during the period under review, the company’s financial performance was below expectation as it posted a turnover of $33,8 million compared to $42,3 million in prior year with exports contributing three percent.

“Current year revenues were predominantly cash following the changes in business model. Focus on   cost containment resulted in selling and  administration expenses being 11 percent lower than prior year.

“The balance sheet has been thoroughly reviewed resulting in a number of impairments, particularly on inventories and accounts receivables,” said Nkala, adding that the clean-up exercise saw the provision for credit losses increasing by $4.4 million.

This resulted in administration expenses rising by 45 percent.

These, Nkala said, together with low margins stemming from production challenges experienced and stock impairments, resulted in an operating loss of $13.4 million against a $2.2 million operating loss in the prior year.

Net finance charges amounted to $1.5 million, which was a 52 percent reduction due to lower borrowings.

“A loss before tax of $14.9 million was recorded leading to a tax credit of $3 million and a loss after tax of $11.9 million. If the non-recurring expenses are excluded, the business made a profit before tax of $535,000 in the second half of the year, bearing testimony to the profitability and going concern of the company,” he said.

“Following a revaluation of property, plant and equipment by a professional valuer a write down of $3.5 million arose which left $15.4 million as total comprehensive loss for the year.

The change in business model adopted at the beginning of the year has been successful in financing working capital resulting in borrowings reducing by $3 million and normal trading terms were restored with major raw material suppliers following clearing of arrears.

“Despite all the write-downs and impairments, the business still has a net asset position of $5.1 million, which provides a good launch pad for its turnaround strategy,” said Nkala.