Business / Companies
Zimplow records impressive results
31 Jul 2011 at 16:02hrs | Views
An improved performance from Zimplow saw the attributable profit growing by 101% to $627,894, backed by a good performance on the domestic front.
Total revenue amounted to $5.0m, with the domestic market and exports contributing 83% and 17% respectively. EBITDA grew ahead of revenue, with a 83% growth to $677,095 indicating EBITDA margin of 13.6% up from 10.6%. The profit before tax for the period stood at $818,985 up from $423,449.
Despite increasing competition both locally and regionally, management is confident that they will exceed their initial budget of a 10% growth in earnings.
The first six months is traditionally the slow growth period contributing about a third of the group's business.
Mealie Brand maintained its flag ship position, with total implements sales going up 27% when compared to the first six months of 2010. A 81% increase in domestic implement volumes over the prior year was recorded, supported by better than expected cotton prices to farmers and an increased tobacco crop. Exports declined by 35% due to timing differences and a drought in East Africa which saw the group not recording any sales to the region and also competition from India and China.
Spares sales and production also declined due to a decline in exports. CT Bolts, volumes in kilograms grew by 85% and by 49% in terms of units from the prior year. The division gained market share on its mild steel products due to a 6% deliberate price reduction strategy to muscle out smaller competitors. Tassburg operated at low capacity due to delays in steel deliveries, however the unit managed to record a 38% increase in sales volumes to 51 tonnes. Both CT Bolts and Tassburg also operated profitably.
In a research note, Nothando Zunga of Imara Edwards Securities said "Although the duty on mild steel products was removed in the recent Mid-Term Fiscal Policy Review, the effect will be marginal on Zimplow as most of their inputs were already duty free. Transportation costs and high steel prices remain the major cost drivers. The comeback of Zisco Steel will significant benefit Zimplow as the proximity will cut transportation costs and enable them to better negotiate on pricing and quality. Export demand is expected to improve, especially from Angola and Zambia, where the company's products are in high demand."
Total revenue amounted to $5.0m, with the domestic market and exports contributing 83% and 17% respectively. EBITDA grew ahead of revenue, with a 83% growth to $677,095 indicating EBITDA margin of 13.6% up from 10.6%. The profit before tax for the period stood at $818,985 up from $423,449.
Despite increasing competition both locally and regionally, management is confident that they will exceed their initial budget of a 10% growth in earnings.
Mealie Brand maintained its flag ship position, with total implements sales going up 27% when compared to the first six months of 2010. A 81% increase in domestic implement volumes over the prior year was recorded, supported by better than expected cotton prices to farmers and an increased tobacco crop. Exports declined by 35% due to timing differences and a drought in East Africa which saw the group not recording any sales to the region and also competition from India and China.
Spares sales and production also declined due to a decline in exports. CT Bolts, volumes in kilograms grew by 85% and by 49% in terms of units from the prior year. The division gained market share on its mild steel products due to a 6% deliberate price reduction strategy to muscle out smaller competitors. Tassburg operated at low capacity due to delays in steel deliveries, however the unit managed to record a 38% increase in sales volumes to 51 tonnes. Both CT Bolts and Tassburg also operated profitably.
In a research note, Nothando Zunga of Imara Edwards Securities said "Although the duty on mild steel products was removed in the recent Mid-Term Fiscal Policy Review, the effect will be marginal on Zimplow as most of their inputs were already duty free. Transportation costs and high steel prices remain the major cost drivers. The comeback of Zisco Steel will significant benefit Zimplow as the proximity will cut transportation costs and enable them to better negotiate on pricing and quality. Export demand is expected to improve, especially from Angola and Zambia, where the company's products are in high demand."
Source - Zimplow
