• Turnall sold 11,354 tonnes in the third quarter against production of 7,082 tonnes following a September fibre shortage
• Gross margin declined from 28% to 15%, eroding gains from higher sales and cost reductions
• The new Harare plant remains under optimisation as financing costs and production efficiency constrain profitability

Harare- Turnall Holdings sold approximately 60% more building materials than it produced during the third quarter of 2026, as a fibre supply disruption reduced factory output by 34% and compressed its gross profit margin from 28% to 15%.

The performance exposes a significant constraint in the manufacturer's recovery programme, which has been anchored on a new Harare fibre cement sheeting plant commissioned in March. Demand for roofing and construction products continues to support sales growth, although lower manufacturing output, rising input costs and changes in the product mix have weakened the financial benefits expected from the investment.

According to the company's trading update released on 10 November, third quarter sales volumes increased 24% to 11,354 tonnes from 9,150 tonnes in the corresponding period of 2025. Production declined to 7,082 tonnes from 10,782 tonnes, leaving a difference of 4,272 tonnes between goods sold and manufactured during the quarter.

The imbalance is equivalent to approximately 60% of quarterly production and points to reliance on previously manufactured products or other inventory movements to sustain sales. Turnall had produced 21,420 tonnes during the first half against sales of 16,807 tonnes, generating a production surplus of approximately 4,613 tonnes over that period. These figures provide a plausible explanation for the third quarter gap, although the trading update does not provide a reconciliation of opening inventories, stock movements and product categories.

Management attributed the production decline to supply chain disruptions that extended delivery times and resulted in a shortage of fibre during September. The company reported that the shortage had been resolved and production had returned to normal levels. The disruption nonetheless reveals the dependence of the company's manufacturing programme on reliable access to specialised production inputs.

The timing is particularly significant. Turnall commissioned its new Harare fibre cement sheeting plant on 15 March 2026, introducing equipment with an installed capacity of 210 tonnes per day. The investment was expected to improve production efficiency, increase capacity and strengthen the company's ability to compete in Zimbabwe's construction materials market.

Six months after commissioning, the facility remains under optimisation, with management concentrating on production yields, product quality and capacity utilisation. The company has not disclosed the new plant's actual quarterly output or utilisation rate, preventing a reliable assessment of how much of its installed capacity is being converted into saleable products.

The distinction is important because the reported 7,082 tonnes of quarterly production covers Turnall's wider manufacturing activities, including concrete products. It cannot be compared directly with the installed capacity of the Harare sheeting plant to establish factory utilisation.

The investment was intended to address a longstanding operational challenge. Turnall has struggled with production constraints, high manufacturing costs and financial losses, while competition from alternative roofing products has limited its pricing flexibility. The new facility offers additional manufacturing capacity, although its commercial contribution depends on reliable input supplies and sufficient utilisation to reduce the production cost per tonne.

The company's latest profitability indicators show that these benefits have not yet fully materialised. Gross margin declined by 13 percentage points to 15% in the third quarter from 28% a year earlier. For the nine months to September, the gross margin decreased from 26% to 18%.

Turnall identified three principal factors behind the decline. Cement prices increased, commissioning expenses associated with the new Harare facility added to production costs, and a greater proportion of sales came from lower margin concrete products. Competitive pricing also constrained the company's ability to pass higher costs to customers.

The combined effect has weakened the relationship between production growth and earnings. A company can expand sales volumes while generating less gross profit if the selling price per tonne falls relative to manufacturing costs or the product mix shifts towards less profitable categories.

At unchanged average revenue per tonne, a 24% increase in sales volumes combined with a reduction in gross margin from 28% to 15% would produce approximately 34% less gross profit than the corresponding quarter. This is an illustrative calculation, since Turnall did not publish third quarter revenue or average selling prices in its trading update.

The actual financial outcome depends on revenue growth and product mix. The calculation nevertheless demonstrates the extent of margin recovery required for increased demand to translate into stronger earnings.

Operating expenses provide some evidence of management progress. The ratio of operating expenses to sales improved from 26% to 19% during the quarter, while the nine month ratio declined from 29% to 23%. These reductions indicate that cost containment measures have lowered the administrative and operating expense burden relative to revenue.

The improvement has not been sufficient to absorb the contraction in gross profitability. Subtracting the 19% operating expense ratio from the 15% gross margin produces an indicative deficit of four percentage points before other operating income and adjustments. In the corresponding quarter of 2025, the equivalent calculation produced a positive two percentage point margin.

For the nine months, the reported gross margin of 18% against operating expenses equivalent to 23% of revenue produces an indicative deficit of five percentage points. These calculations are not substitutes for a reported operating profit figure, since the trading update does not disclose the complete income statement.

The first half financial results provide further evidence of the earnings challenge. Revenue increased 15% to US$5.81 million during the six months to June 2026, supported by a 33% increase in sales volumes to 16,807 tonnes.

Despite the revenue expansion, gross profit declined from approximately US$1.25 million to US$1.17 million as gross margin contracted from 25% to 20%. The total comprehensive loss widened from US$244,884 to US$665,856, reflecting weaker manufacturing margins, financing costs and tax related adjustments.

Finance costs increased by approximately 109% to US$139,800 during the first half. The increase was associated partly with the cessation of borrowing cost capitalisation following commissioning of the Harare plant, which moved relevant financing charges into the income statement.

Turnall's investment therefore creates a need for higher production efficiency and stronger margins to support the financing obligations attached to its expanded manufacturing base. Increased installed capacity has limited commercial value when shortages constrain throughput and lower margin products account for a growing share of sales.

The sales figures also require a reporting qualification. Turnall's latest update records nine month volumes of 28,161 tonnes against a comparative 21,824 tonnes, producing reported growth of 29%. The comparative figure reconciles with the company's published first half 2025 sales of 12,674 tonnes and third quarter sales of 9,150 tonnes.

Its November 2025 trading update, however, reported cumulative sales of 27,348 tonnes. That historical figure differs materially from the comparative now presented, and the company has not explained the adjustment in its latest announcement. Until reconciled, the nine month growth rate should be treated as management's reported comparison rather than an independently consistent historical series.

Quarterly sales growth remains supported by consistent comparative figures, with sales increasing from 9,150 tonnes to 11,354 tonnes. This establishes that market demand improved even as production declined.

The operating environment has provided opportunities for building materials manufacturers. Turnall reported continuing demand from public and private construction activity, supported by relative exchange rate stability and easing inflation. Competition remained intense, limiting the scope for manufacturers to recover rising costs through higher prices.

Zimbabwe's construction market includes roofing sheets, concrete tiles and other building products serving residential, commercial and infrastructure development. Manufacturers must compete on price, durability, distribution and product availability, making production efficiency important where customers can substitute between materials.

For Turnall, the shift towards lower margin concrete products demonstrates that volume growth can be achieved without an equivalent improvement in profitability. Restoring the contribution of fibre cement sheets requires consistent production and a competitive cost structure, supported by sufficient demand to utilise the new equipment.

The company is also addressing electricity costs through a solar power installation at its Harare operations, scheduled for completion during the fourth quarter of 2026. Management expects the project to supplement grid supply, reduce interruptions and improve manufacturing efficiency.

Electricity reliability can support production availability, although the September fibre shortage demonstrates that energy investment alone will not eliminate supply chain risks. A sustained improvement requires reliable procurement of fibre, cement and other inputs, alongside preventive maintenance and production planning.

Turnall also intends to upgrade its Bulawayo sheeting plant to manufacture products using synthetic fibres, supporting plans to resume regional exports. The company is considering additional product categories, including timber and solar energy products, to broaden its distribution offering and create further revenue opportunities.

These initiatives could diversify income and strengthen market access. Their financial contribution will depend on investment requirements, product profitability and the ability to preserve cash while existing manufacturing operations undergo optimisation.

Despite the difficulties, management reported positive operating cash flows during the nine months and continued sales growth. The board acknowledged that weaker gross margins and higher financing charges require urgent attention as the company works towards sustainable profitability.

Turnall's third quarter performance identifies the principal constraint facing its recovery. The market is absorbing additional products, and management has reduced operating expenses relative to sales. Manufacturing costs and production reliability have prevented those improvements from generating sufficient gross profit.

The new Harare plant offers a route towards lower unit costs through improved utilisation and production efficiency. Its contribution will become clearer as the company reports sustained output, higher gross margins and a reduction in the financial burden associated with manufacturing disruptions.

The priority is to convert demand into profitable production rather than continue relying on inventory to bridge temporary supply shortages. Restoring reliable factory throughput, increasing the contribution of higher margin products and containing financing costs would provide the operating foundation required for Turnall's investment to generate sustainable returns.