NTS said margins were squeezed as price influenced purchasing decisions across all market segments within a crowded market
Business Reporter
Listed tyre retailer National Tyre Services recorded a 60 percent decline in profit before tax to $ 477 017 for the period ending March 31, 2014 as aggregate demand slowed due to the liquidity constraints in the economy.
This was after revenues came down 11 percent to $15,7 million during the period under review.
“Despite a strong start in the first quarter which was in line with budget, revenue ended the year at 11 percent the prior year due to the effects of the overall trading environment and stronger emphasis on working capital reduction in order to mitigate financial risk.
Margins were squeezed as price influenced purchasing decisions across all market segments within a crowded market.
“The strategic cost management and productivity enhancement initiatives implemented resulted in overheads being maintained at same levels as the prior year,” the company said.
In terms of divisions, the group said unit sales of new tyres in the retail and service division were down 9 percent compared to the prior year and focus was now on promotional activities in response to changing market trends to mitigate further decline. Unit sales for retreads were however 3 percent up although growth is being hampered by a shortage of good quality casings resulting from the market’s preference for cheap and low quality new truck tyres.
“Lobby efforts for bona fide retreaders to be allowed to import good quality casings are ongoing through industry association. Penetration into the mining sector benefited the re-lugging factory,” the company said.
Looking ahead the company said it had put in place strategies to grow revenue and market share by coming up with a new distribution model that is being aggressively rolled out .
It is meant to provide a suitable route to market which will allow for access to new markets and empowering small operators to graduate into the mainstream tyre industry.
“Marketing efforts will also focus on customer retention, rehabilitation and product range expansion,” the company said.