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Zimplow declares healthy dividend of $500K as cost-cutting measures pay off

Almot Maqolo
HARARE – After-tax profits for Zimbabwe’s farm implements manufacturer Zimplow rose 76% to $6 million for the year ended 2018, after a significant growth in topline to $48.7 million, the company has revealed.

In the past few years, the firm has been reporting losses. However, dramatically things changed in 2017 when it posted a net profit of $3.4 million, its first since 2011.

“The 2018 financial year was a successful one for the Zimplow Group drawing from growth in the national GDP and a resurgent agricultural sector. Group revenue went up by 25% from $39.1m to $48.7m,” the group chairman Thomas Chataika said in a statement accompanying the results on Tuesday.

“Success with cost containment measures saw the net profit percentage up from 9% to 12%. Net profits available to the shareholders were up by 76% from $3.4 million to $6 million.”

During the period under review, total sales of goods reached $46.29 million, representing a 26% increase compared to the previous financial period.

Sale of goods to the domestic market increased by 35.18% to $44.41 million from $32.85 reported in 2017. However, partially offsetting the gains recorded was sale of goods to the export market which declined 51% from $3.83 million previously to $1.88 million.

Administration expenses was up 20% from $6.8 million to $8.19 million. Operating profit went up 77% to $8.45 million from $4.77 million previously. Net cash from operations went down by 58% from $4.45 million in 2017 to $1.89 million. The group’s total assets increased to $47.78 million from $40.68 million.

The group acquired term loan facility of $2 million secured against a notarial covering bond, which included the company’s inventory. It also acquired $2 million facility secured against a building. The average cost of the borrowings was at 8%.

As at December 31, the company disposed of its 49% interest in Afritrac Pvt Ltd for a consideration of $196 059. The carrying value of net identifiable assets disposed of including currency translation difference amounted to $448 567 at December 31, 2018, resulting in a loss on disposal of $342 853.

The group – which is also among the largest manufacturers and distributors of farming implements in Sub-Saharan African region –operates through four divisions comprising of Barzem, Mealie Brand, CT Bolts and Farmec.

Mealie brand saw its revenues increasing by 9% from $11.5 million to $12.5 million with the mix tilted towards more profitable local sales. Underlying volumes of local implements were up 19% to 43 490 with exports down 48% to 23 610. Due to effective cost management net profits went up 41% from $2.9 million to $4.1 million.

“Mealie Brand generated sufficient export sales to sustain itself as well as to fund other divisions of the group,” Chataika said.

Farmec revenues surged by 59% from to $17.7 million from $11.1 million largely on a strong showing in tractor sales. Tractor sales were up 75% to 166 units from 95 units in 2017. Net profit increased 145% from to $2.7 million from $1.1 million.

Revenue for Powermec was up 116% from to $4.1 million from $1.9 million. Of the topline performance, gensets were 80% of the turnover with parts and service making up the balance.

“We will look to increase the relative contribution of more predictable parts and service revenues to the total mix. GP margins were squeezed due to lower stock turn and consequently Powermec made a profit of $350k, which was up only 18% on prior year,” he said.

Revenues at Barzem increased 7% to $12.7 million while the sales mix of 40:60% between whole goods and parts/ service was good, profitability remains muted as the business currently operates at a fraction of its potential.

“Alignment of shareholder objectives and interests is the first step towards putting Barzem in a position to competently serve the local market. We are working at this,” the chairman stated.

Turnover at CT Bolts was up 20% from $1.5 million to $1.8 million with profitability up 96% to $724 000. However, Chataika said this remains a “niche business” and an increased focus on the northern half of the country has produced extra revenues and profits for the company.

In the outlook, the firm pins hopes on the mining sector, as it projects an improved performance from Barzem for the coming financial year on the back of parts and service. The prospects of the agricultural season plays an important role in the life of Zimplow. The group has declared a final dividend of $500 000.

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