Zimpapers Logo

Nelson Gahadza

Senior Business Reporter

Diversified agro-concern, Zimplow Holdings says it is engaged in new initiatives to return the business to profitability in 2024, riding on the back of strong order books across the agriculture, logistics and mining sectors.

According to the group’s financials for the interim to June 30, 2024, the El Nino-induced drought impacted the group’s flagship business units in the agriculture cluster, which also witnessed a significant reduction in volumes.

“The group has pivoted towards a more targeted approach to generating sales, relying on system-driven demand forecasting, direct marketing, and rationalisation of stock holdings and suppliers,” acting group chief executive Mr Willem Swan said in a statement of the financials.

Zimplow manufactures and markets a diverse range of products for the construction, infrastructure, and agricultural sectors in Zimbabwe.

It also manufactures and distributes metal fasteners for the mining, construction, and agricultural sectors and has interests in property management and leasing.

As part of efforts to navigate the El Nino-induced challenges, the group is embarking on a cost containment plan to preserve cash flow.

The initiatives include a group-wide staff rationalisation exercise and an organisational restructuring exercise that will result in the unbundling of the clusters approach to enable the group to benefit from operational efficiencies within separated business units.

“Rationalisation of staff and the group’s overhead structure, supplier analysis, and verification of pricing and demand planning will enable the business units to compete more effectively and service clients more efficiently, leading to greater customer satisfaction and repeat purchases,” said Mr Swan.

The group also intends to dispose of residential and commercial properties valued at US$2,75 million identified as non-core assets amongst a property portfolio of US$7,5 million, with the proceeds earmarked for working capital for the group’s mining and infrastructure clusters pursuant to the conclusion of the Barzem transaction.

In addition, the group is pursuing business turnaround programmes, particularly for the agriculture business units and Trentyre. Initiatives include closure of non-performing branches, consolidation, and product refinement and development.

Mr Swan said the group had to pivot quickly to find sustainable pockets of opportunities on the back of the impact of the drought and supply chain challenges.

In terms of business unit performance, in the agriculture cluster, Farmec  turnover was 29 percent below the prior year, but in terms of sector competitive analysis, the unit accounted for 20 percent of all new tractor sales in the first quarter of 2024 and 10 percent in the second quarter of 2024.

“The lower-than-expected Q2 2024 performance is mainly attributed to the non-availability of the MF200 series which constitutes 70 percent of Farmec tractor sales.

“In terms of high-horsepower units, Farmec supplied 66 percent of the 130 to 150-horsepower units on the local market during the period under review,” Mr Swan said.

He said Valmec had been reabsorbed into Farmec, while former national sales manager Mr Eddington Buranga had been appointed the general manager, effective May 2024.

The business unit, according to Mr Swan, has a strong order book for the second half of2024, with the 200 series being made available by the supplier.

He added that Farmec successfully concluded a finance facility with a leading financial institution during the period under review, which will make it easier for farmers to access finance for tractors and equipment through Farmec.

Mealie Brand volumes were down 61 percent in the local market and exports down by 7 percent, resulting in turnover being 45 percent below prior year.

Mr Swan said to pivot the business units away from the current seasonal sales pattern and susceptibility of its products to drought, the capacitation programme enabled the business unit to expand into the bulk mining supplies arena, the manufacture of two-wheel and small horse power tractor implements.

“These initiatives will add much-needed variety to the business unit’s product offering and sustain the business going forward,” he said.

In logistics, Scanlink has a strong order book for the second half of 2024, which should see it achieve parity with 2023 turnover.

“After sales (spares and workshops) recorded 15 percent growth over the previous year to date, which is commendable.

The gross profit percentage is 7 percent ahead of last year to date and 9 percent ahead of their target,” said Mr Swan.

Trentyre revenue was down 27 percent below last year to date and 37 percent behind their target for the six months to June 2024.

In the mining cluster, Tractive Power Solutions (TPS) surpassed its 2023 turnover target, but delayed equipment deliveries from China and Korea by four months resulted in lower-than anticipated earthmoving equipment sales for the period under review.

Powermec has a strong order book, and generator sets will be more readily available, and the unit expects strong demand for alternative power owing to the shortage of power from the national grid. During the period under review, CT Bolts opened a new outlet in Msasa, and the unit has shown steady growth to post 1,6 tonnes for the June period.

Mr Swan said the nail factory is due to land in September and production to commence in October 2024, which will increase volumes at all branches.

Meanwhile, the group recorded an 18 percent negative turnover variance forthe period under review compared to the same period last year.

Mr Swan said the group believed the second half of the year will yield better results owing to a strong order book across the group, the presence ofaccess to finance for customers in the agriculture sector, and credit arrangements with suppliers.

He added that the long-range weather forecast for the 2024/25 croppingseason is positive news, which the group believes will lead to increasedopportunities in the fourth quarter of 2024.