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Turnall Managing Director, Mr Caleb Musodza, presenting the company's results at an analyst briefing

Turnall Holdings continued on its impressive performance from 1Q15 and reported 9% y/y sales growth in 1H15 (US$14mn vs. US$12.8mn). The top-line growth was led by domestic growth which was driven by 8% volume growth (increased y/y to 29,435 tonnes in 1H15 vs. 27,144 tonnes in 1H14) and was complemented by a fairly stable pricing despite competitive environment.

The Gross margins were at 22% in 1H15 (vs. 6.8% in 1H14) buoyed by the overhead recovery and procurement savings initiatives. In particular, the initiative to import fibre from Russia has been fruitful with estimated savings of ~20% to the organisation on Fibre cost (second largest raw material cost). In addition, the management reiterated the potential accrual of additional savings in 2H15.

One of many in coming years
Operating margins turned positive in 1H15 reminiscent of the turnaround adopted in late 2014. One of the key initiatives of the Turnaround strategy adopted in late 2014 was the emphasis on right sizing the organisation; reflected in 53% y/y decrease in Administrative costs and 10% decline in selling costs respectively in 1H15.

The management highlighted its intent on acquiring market share and targeting profitable export markets while reducing inventory levels to optimal levels. The three fold objective would create further room for margin expansion as the current plant utilization is lower at 45% at Fibre Cements Plants and 65% at Concrete Tile Plant.

The finance costs were down 23% y/y to US$0.68mn in 1H15 due to debt repayment of US$0.91mn loan and conversion of costlier short term debt into long term debt. The management is further targeting opportunities to refinance loans to lower finance cost.

Turnall’s net profit for 1H15 was at US$0.4mn and EPS at USc0.08.

Cash, cash and more cash
Turnall reported operational cash flow of US$1.8mn (vs. US$2.8mn). The cash flow would continue to reflect upward trajectory owing to the Company’s adoption of cash-trading selling model. The Company’s target of debt pay-off by 2017 looks achievable on current performance and measures.


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