Tough times boost bud­get tyre brands

The Star Early Edition - - COMPANIES - Tawanda Karombo

THE BIG­GEST Zimbabwean com­peti­tor of Tiger Wheel and Tyre says bud­get brands are dom­i­nat­ing ow­ing to eco­nomic dif­fi­cul­ties, which has oc­ca­sioned fast growth in the in­for­mal sec­tor, although a bet­ter agri­cul­tural sea­son and firm­ing com­mod­ity prices are now ex­pected to boost the prime brands cat­e­gory.

Zim­babwe’s Na­tional Tyre Ser­vices said on Fri­day that the tyre in­dus­try in Zim­babwe, like the rest of the econ­omy, “con­tin­ued to suf­fer from the com­bined ef­fects of low con­sumer de­mand and for­eign pay­ments de­lays”, as a liq­uid­ity crunch con­tin­ues un­abated.

Although the Zimbabwean econ­omy has been dif­fi­cult over the past few years, South Africa’s Tiger Wheel and Tyre has sought to ex­pand, open­ing two branches in Harare, Kwekwe, Bu­l­awayo and re­cently in Vic­to­ria Falls.

Stephen Ny­athi, who man­ages the Vic­to­ria Falls branch, said they were “ex­cited to in­tro­duce our­selves to mo­torists in the area” which is one of Zim­babwe’s prime tourist des­ti­na­tions.

But Na­tional Tyres has not been as bub­bly as Tiger Wheel and Tyre, with James Moyo, then chair­per­son of the com­pany, say­ing rev­enue for the year to end March 2017 de­clined by 8.8 per­cent. The com­pany de­layed re­lease of its fi­nan­cials ow­ing to de­lays in com­plet­ing the au­dit process.

“The sales mix was dom­i­nated by bud­get brands whose mar­gins are lower than premium brands. The cost con­tain­ment pro­gramme com­menced in the prior year yielded re­sults as the loss for the year de­clined by 75 per­cent,” Moyo said.

The loss for the year amounted to $155 700 af­ter rev­enues de­clined to $11.9 mil­lion.

Com­pe­ti­tion

Moyo added that “the growth of the in­for­mal sec­tor cre­ated an un­even play­ing field, re­sult­ing in fierce price com­pe­ti­tion which di­luted mar­gins” for the com­pany dur­ing the pe­riod un­der re­view.

The com­pany is, how­ever, op­ti­mistic of Zim­babwe’s fu­ture prospects ow­ing to the im­proved agri­cul­tural sea­son and firm­ing com­mod­ity prices.

This will boost its sales of premium tyre brands for the agri­cul­ture and min­ing sec­tors, while farm­ers get a wind­fall from to­bacco and maize sales.

“The com­pany’s im­proved fi­nan­cial per­for­mance will be sus­tained by higher mar­gins from premium brand, di­rect sourc­ing and the restora­tion of nor­mal re­la­tions with two of our ma­jor for­eign sup­pli­ers.”

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