Business / Companies
Zimplow pursues dominance in the key sectors of agribusiness and mining
31 Aug 2012 at 05:35hrs | Views
Focus will be on Agriculture and Mining: CE Zondi Kumwenda, left, with FD Francis Rwakonda
Zimplow is pursuing dominance in the key sectors of agribusiness and mining, CE Zondi Kumwenda told an analyst briefing yesterday, adding that the acquisition of 57.2% stake in Tractive Power Holdings was part of that strategy.
"We continue to pursue growth strategies as we always want to venture into areas where we dominate and this motivated the TPH deal," Kumwenda added.
"Since dollarisation we have always desired to venture into and dominate the two key growth areas in Zimbabwe which are agriculture and mining," he said.
Turning to the operational review, Kumwenda told the briefing that a poor agricultural season, liquidity shortages and droughts in most markets affected the group performance adversely.
Mealie Brand the flagship brand for Zimplow registered a 49% decline in local implement sales unit to 9 359 units.
"For local implements sales it was a bad year due to the poor 2011-12 agricultural season weighed down mainly by price wars in cotton which is traditionally the major market." he said.
"The liquidity also affected us as there was not much cash from tobacco proceeds circulating within small scale farmers who are our major customers considering that 63% of tobacco proceeds were through contract farming and the farmers will be paying back their contractors," Kumwenda told the meeting.
Exports however grew by 87% to 10 730 units with Kumwenda saying "…there remained strong demand in the region and it is growing. We are however amazed with the growth considering it's a drought year."
Total implements sales declined by 16% whilst spares sales were also down by 29% to 70 825 units. "The decline in sales saw production also declining by 7% to 1 411 072kg," he added.
Turning to CT Bolts, Kumwenda said the performance "was not too bad." Mild steel bolts volumes declined by 16% to 48 017kgs whilst nails and screws were also 30% down at 9 914 and 13% to 7.743 million units respectively compared to prior year.
Mild steel units however, were up 5% at 2 427 195kgs' and HT Bolts also rose by 0.3% to 1 576 958 units.
Kumwenda noted that production for CT Bolts was up 27% to 65 785kgs. "We are however, pleased to report that despite a drop in volumes ,CT Bolts revenue increased by 6% due to a an increase in dollar revenue as a result of the change in sales mix from mild steel to HT Bolts compared to prior year." he added.
Tassburg overall volumes were down 15% with Verandah screws weighing the most compared to other units dropping heavily by 69% to 2 676kgs due to intense import competition from China which was 2 to 3 times cheaper.
Revenue for Tassburg was 13% down compared to prior year at $334 878.
Kumwenda told the meeting that Afritac's implements and spares volumes rose by 15% and 38% respectively despite the liquidity crunch in the region.
"Sales were buoyed by the Lesotho market which has 2 seasons and also there have been good enquiries from the Western Cape. Were it not for erratic rains, sales growth would have been higher," he noted.
He also told the meeting that Afritac remained profitable and that they were looking at increasing their stake closer to 100% before the end of the year.
Turning to cost movers, employment costs were up 5% driven by labour whilst finance costs also rose driven by a bridging finance of $3.2 million to facilitate the step by step takeover of TPH.
FD Francis Rwakonda told the meeting that revenue declined by 12% to $4.3 million. "The revenue decline resulted from a 25% drop in domestic sales to $3.108million.The export growth of 44% to $1.194 million minimized the overall revenue decline."
"Mealie Brand weighed in $2.390 million whilst CT Bolts contributed $1.293 million and the remainder was shared almost equally between Tassburg and Afritac," Rwakonda added.
"Net finance costs were driven by the bridging finance of $3.2million advance that we paid to RBZ to secure the deal," he added. Net Income dropped by 128% to a loss position of $0.2 million compared to a $0.6 million profit position. Earnings per share, as a result, declined by 126% to -0.05c from 1c.
Turning to the Balance Sheet Rwakonda noted that borrowings were reduced after the rights issue post the balance sheet date citing "…we now have a little gearing as borrowings are around $500 000."
"Our inventory on current assets increased as two-thirds of our business is normally done in the second half whilst 85% of our receivables have tenure of 30-days and below," he noted.
In a trading update Kumwenda told the briefing that group revenue for the month of July was $5.8 million, 8% below prior year and 12% below year to date budget.
He however, noted that the group had returned to profitability in the month of July recording a PBT of $65 417 citing, "…we are set to clear out the year to date loss of $56 2309 in the second half."
He noted that local implements units were 48% down at 11 119 units whilst exports were 129% up at 21 931 units. CT Bolts and Tassburg volumes were down 10% and 7% compared to last year.
Turning to the outlook Kumwenda noted that rainfall patterns in the region remained erratic.
"We however, are working to improve competitiveness on Mealie Brand. The likely global grain shortage is likely to boost our sales." Kumwenda added.
He told the meeting that the dip in revenue and profits was a cyclical trend that Zimplow had witnessed in its 10 year history. "In drought years implements sales do not perform well and spares are the ones which drive growth."
Kumwenda also told the meeting with regard to Tassburg that, "…we will whittle off Tassburg as it is easier to import than to produce citing the 24 employee in the division would be absorbed within the group."
"We currently have 52 000 implements at the factory which can cater even up to the next half year of 2013. We are however, getting strange enquiries of 60 000 to 70 000 and if this happens it will create a bottleneck in supply but boosting our topline."
"We continue to pursue growth strategies as we always want to venture into areas where we dominate and this motivated the TPH deal," Kumwenda added.
"Since dollarisation we have always desired to venture into and dominate the two key growth areas in Zimbabwe which are agriculture and mining," he said.
Turning to the operational review, Kumwenda told the briefing that a poor agricultural season, liquidity shortages and droughts in most markets affected the group performance adversely.
Mealie Brand the flagship brand for Zimplow registered a 49% decline in local implement sales unit to 9 359 units.
"For local implements sales it was a bad year due to the poor 2011-12 agricultural season weighed down mainly by price wars in cotton which is traditionally the major market." he said.
"The liquidity also affected us as there was not much cash from tobacco proceeds circulating within small scale farmers who are our major customers considering that 63% of tobacco proceeds were through contract farming and the farmers will be paying back their contractors," Kumwenda told the meeting.
Exports however grew by 87% to 10 730 units with Kumwenda saying "…there remained strong demand in the region and it is growing. We are however amazed with the growth considering it's a drought year."
Total implements sales declined by 16% whilst spares sales were also down by 29% to 70 825 units. "The decline in sales saw production also declining by 7% to 1 411 072kg," he added.
Turning to CT Bolts, Kumwenda said the performance "was not too bad." Mild steel bolts volumes declined by 16% to 48 017kgs whilst nails and screws were also 30% down at 9 914 and 13% to 7.743 million units respectively compared to prior year.
Mild steel units however, were up 5% at 2 427 195kgs' and HT Bolts also rose by 0.3% to 1 576 958 units.
Kumwenda noted that production for CT Bolts was up 27% to 65 785kgs. "We are however, pleased to report that despite a drop in volumes ,CT Bolts revenue increased by 6% due to a an increase in dollar revenue as a result of the change in sales mix from mild steel to HT Bolts compared to prior year." he added.
Tassburg overall volumes were down 15% with Verandah screws weighing the most compared to other units dropping heavily by 69% to 2 676kgs due to intense import competition from China which was 2 to 3 times cheaper.
Revenue for Tassburg was 13% down compared to prior year at $334 878.
Kumwenda told the meeting that Afritac's implements and spares volumes rose by 15% and 38% respectively despite the liquidity crunch in the region.
"Sales were buoyed by the Lesotho market which has 2 seasons and also there have been good enquiries from the Western Cape. Were it not for erratic rains, sales growth would have been higher," he noted.
He also told the meeting that Afritac remained profitable and that they were looking at increasing their stake closer to 100% before the end of the year.
Turning to cost movers, employment costs were up 5% driven by labour whilst finance costs also rose driven by a bridging finance of $3.2 million to facilitate the step by step takeover of TPH.
FD Francis Rwakonda told the meeting that revenue declined by 12% to $4.3 million. "The revenue decline resulted from a 25% drop in domestic sales to $3.108million.The export growth of 44% to $1.194 million minimized the overall revenue decline."
"Mealie Brand weighed in $2.390 million whilst CT Bolts contributed $1.293 million and the remainder was shared almost equally between Tassburg and Afritac," Rwakonda added.
"Net finance costs were driven by the bridging finance of $3.2million advance that we paid to RBZ to secure the deal," he added. Net Income dropped by 128% to a loss position of $0.2 million compared to a $0.6 million profit position. Earnings per share, as a result, declined by 126% to -0.05c from 1c.
Turning to the Balance Sheet Rwakonda noted that borrowings were reduced after the rights issue post the balance sheet date citing "…we now have a little gearing as borrowings are around $500 000."
"Our inventory on current assets increased as two-thirds of our business is normally done in the second half whilst 85% of our receivables have tenure of 30-days and below," he noted.
In a trading update Kumwenda told the briefing that group revenue for the month of July was $5.8 million, 8% below prior year and 12% below year to date budget.
He however, noted that the group had returned to profitability in the month of July recording a PBT of $65 417 citing, "…we are set to clear out the year to date loss of $56 2309 in the second half."
He noted that local implements units were 48% down at 11 119 units whilst exports were 129% up at 21 931 units. CT Bolts and Tassburg volumes were down 10% and 7% compared to last year.
Turning to the outlook Kumwenda noted that rainfall patterns in the region remained erratic.
"We however, are working to improve competitiveness on Mealie Brand. The likely global grain shortage is likely to boost our sales." Kumwenda added.
He told the meeting that the dip in revenue and profits was a cyclical trend that Zimplow had witnessed in its 10 year history. "In drought years implements sales do not perform well and spares are the ones which drive growth."
Kumwenda also told the meeting with regard to Tassburg that, "…we will whittle off Tassburg as it is easier to import than to produce citing the 24 employee in the division would be absorbed within the group."
"We currently have 52 000 implements at the factory which can cater even up to the next half year of 2013. We are however, getting strange enquiries of 60 000 to 70 000 and if this happens it will create a bottleneck in supply but boosting our topline."
Source - zfn
