Tobacco Sales Floor volumes rise 143%

ZIMBABWE'S biggest tobacco auction firm, Tobacco Sales Floor (TSF), says volumes rose by 143% during the third quarter ended July 31, 2021, in line with higher national output reported during the period, following a good rainfall season.

A trading update released on Monday said the golden leaf bales shipped to the firm's Harare operation represented the bulk of volumes handled during the review period.

National tobacco volumes increased to 200 million kilogrammes during the period, a 13% rise, according to Tobacco Industry and Marketing Board data.

"Tobacco Sales Floor handled 16,7 million kg of tobacco in the quarter against 6,9 million kg handled in the comparative period, an increase of 143%," said James Muchando, company secretary at the Zimbabwe Stock Exchange-listed TSL Limited, the firm that controls TSF.

"Of this volume, 60% was on behalf of tobacco contractors in Harare and the new decentralised floors in Karoi and Marondera in line with the group's strategic thrust.  Propak hessian volumes are cumulatively 21% ahead of prior year. Due to the early start to the tobacco trading season, most of these volumes were delivered in the first half of the year and consequently the volumes in this quarter are 30% lower, reflecting this timing difference. Agricura achieved strong volume growth across most product lines due to increased market share, stock availability and attractive pricing particularly on locally manufactured products," Muchando added.

TSL said lending rates in Zimbabwe's banking system were making it difficult to access funding.

The central bank's monetary policy committee has maintained interest rates, also known as policy rates, at between 30% and 40% throughout this year.

"The operating environment remains difficult. There was a significant increase in pricing across the market in May 2021 following regulatory pronouncements. Inflation has remained relatively stable, however, interest rates on local borrowings continue to be unsustainably high," Muchando said.

TSL also raised concern over backlogs in foreign currency settlement on the auction system, which it said had resulted in increasing disparities between the official exchange rate and rates obtaining on the alternative market.

The company said a good rainfall season had ensured that output of other agricultural commodities was likely to be ahead of the previous season, with the group achieving good volume growth across most business units and remaining profitable.

"Revenue is ahead of prior year, for the quarter, by 9% (inflation adjusted) and 105% (historical cost). Adequate interest cover on borrowings is maintained with most working capital requirements funded from internally-generated resources. The developments on the marketplace from May 2021 have increased pressures on margins and may adversely affect efforts to preserve value,'' TSL said.