GB banks on mining recovery, power demand

Michael Tome Business Writer

GENERAL Beltings (GB) says it is banking its future performance on firming mineral prices and the potential increase in demand for conveyor belts from thermal power generation facilities.

The company believes that the anticipated rebound in the mining sector, compounded by rising mineral prices, will significantly benefit its business operations and overall financial health.

GB also noted that the impact of the El Niño-induced drought on power generation has been widespread and severely detrimental to the economy.

According to GB, this situation has prompted a pressing need for alternative energy solutions.

As such, the company is hopeful that there will be a corresponding rise in demand for conveyor belts as government authorities and industry work to alleviate the ongoing power supply deficit—particularly through the expansion of thermal power generation.

Conveyer belts are essential for the efficient transportation of materials in many industrial applications, including coal and mineral extraction, which makes GB’s products critical in the current context of energy supply challenges.

“Although the challenges of the first half of the year were daunting, the anticipated recovery in the mining sector through firming mineral prices is a source of optimism as it underpins the fortunes of the General Beltings Division.

“To ameliorate the current negative effects of power supplies deficit there would be a need to augment power supplies with increased thermal power generation thus increasing demand for conveyor belts from General Beltings Division,” said General Beltings group chairperson, Tichaona Mabeza in the financial review for the half year to June 2024.

In other operations, GB said its chemicals subsidiary, Cernol Chemicals is expected to further consolidate in its traditional markets as tourism continues in its recovery path post-COVID through enhanced product offering and greater pricing flexibility.

Improved performance in the dairy sector and the need for hygienic solutions in mitigation of potential pandemics induced by water shortages are expected to spur Cernol Chemicals’ performance in the final quarter of the current financial year.

During the period under review, GB revealed a significant increase in total volumes, reaching 455 tonnes a notable 13 percent increase from 402 tonnes recorded in the previous period.

The primary driver behind this volume growth was the market recovery efforts of Cernol Chemicals, which successfully compensated for the volume declines experienced by General Beltings.

Cernol Chemicals volumes surged to 328 tonnes, marking a remarkable 64 percent increase from the 199 tonnes reported in the same period last year.

This is attributable to strengthened market conditions and increased demand for Cernol Chemicals products.

In contrast, General Beltings faced significant challenges, with volumes decreasing 37 percent to 127 metric tonnes, from the 203 metric tonnes achieved in the comparable period.

This downturn was largely influenced by external market factors that negatively impacted demand.
Despite these fluctuations in volume GB’s total turnover closed at ZiG22 million, which represented a 15 percent decrease from the previous period’s ZiG26 million.

This decline was a reflection of the mixed performances between the two divisions, especially with General Beltings seeing a downturn despite a buoyant first quarter driven by energy sector orders carried over from the prior year.

The situation worsened in the second quarter as demand significantly dropped due to softening platinum prices, which in turn reduced downstream demand for conveyor belts.

The anticipated completion of quasi-institutional tenders was also stalled, primarily due to pricing pressures arising from the new currency measures that rendered some contracts uneconomically viable.

Gross profit for the period was ZiG11 million, marking a 22 percent decline.

This decline is directly correlated with the reduced turnover and insufficient recovery of fixed overhead costs.

These reductions were a result of targeted cost-cutting measures aimed at aligning expenses with the decreased revenue from key markets, particularly in the mining sector.

Operating costs were 33 percent lower at ZiG11 million compared to ZiG16 million reported in the same period last year.

According to GB, the economy’s increasing dollarisation and imported inflation in USD contributed to rising utility costs.

However, these pressures were partially mitigated by improvements in process efficiencies within operations.

Ultimately, the adjusted operating profit stood at ZiG14 million, reflecting a robust 40 percent increase compared to the previous period’s ZiG10 million.