Zimplow exploits pockets of opportunities in the market
By Almot Maqolo
HARARE – Agriculture and construction equipment are highly competitive businesses. Zimplow believes it has a variety of competitive advantages that allow it to strengthen its position in markets where it already has a strong presence while allocating additional resources to markets and products with significant growth potential. The company’s competitive advantages include well-known brands and a wide choice of competitive items.
Zimplow says it is in a strong position after reporting a resilient first quarter performance despite the challenging trading environment. According to the company, the period was characterized by inflationary pressures, foreign currency shortages, power cuts and reduced disposable incomes. In real terms, revenue and profitability increased by 5% and 48%, respectively. The company said in a trading update that it was encouraged by the resilient performance as management continues to take advantage of pockets of opportunities in the market given the diversified structure of the group.
Of the group divisions, Farmec recorded the most significant growth in volumes across all product lines. Tractors and implement volumes increased by 53% and 13% respectively. Parts sales and service capacity utilisation increased by 7% and 51% respectively, against the prior year and same period under review. Farmec is poised to continue driving group performance given the firm demand experienced in Q1 2022. The growth in export implement volumes at 26% ahead of the prior year has set up Mealie Brand for a positive start, despite local implement volumes dropping by 15% against the same period last year.
“The erratic rainy season and hyperinflationary environment have dampened the uptake of animal-drawn implements locally.” Farmers have therefore relied on maintenance of their existing implements, resulting in the growth of spares sold by 41% against the prior year, respectively. The group expects the export market volumes to continue to deliver positive performance on the back of better rainfall patterns experienced in the region outside Zimbabwe and the relaxation of Covid-19 restrictions.
“Going forward, management will continue to focus on improving factory efficiencies to mitigate the global raw material cost push factors,” said the company. The group has exposure to the country’s core economic drivers in agriculture, mining and infrastructure development. Farming is the group’s biggest revenue generating market segment. So far, the disappointing rain season and adverse economic conditions are expected to depress agricultural activities. This should particularly adversely impact agricultural spending in the coming season.
In the mining and infrastructure cluster, Barzem’s recorded depressed volumes of earth moving equipment at 88% below last year’s performance for the first quarter. This was attributed to foreign currency bottlenecks. “Management concentrated on value preservation and the provision of tailor made services in order to meet the fleet maintenance needs of our customers.” To that end, workshop efficiencies were 53% ahead of the prior year for the same period under review.
CT Bolts reported a 25% increase in the tonnage of fasteners sold compared to the same period in the prior year. At Powermec, volumes in gen-sets and solar equipment were 44% ahead of the prior year, whilst capacity utilisation increased by 71%. “In the first quarter of 2022, the national grid experienced increased power cuts, boosting demand for the company’s products and services,” it said. The top line improved by 230% in comparison to the same period in the prior year. “The performance of the solar range of products continues to gather traction and the Group looks forward to a strong performance premised on increased demand for alternative power products given the power outages experienced so far in 2022.”
In the logistics and automotive cluster, Scanlink increased revenue by 64% in real terms compared to the first quarter of the previous year, owing to strong after-sales performance. This comes as the availability of trucks and buses from the principal supplier has improved. Volumes sold in the period under review were in line with the prior year. Parts sales increased by 57% and service hours grew by 6%. Trentyre recorded a 21% growth in off-road tyres, whilst lower than prior year performance for commercial and consumer tyres resulted in an average 14% drop in revenue in Q1 2022 in comparison to the prior year’s same period.
The steps taken by the Board, which included the realignment of the executive management structure to group strategy and the leveraging of group synergies, have propelled the group to a position of being a one stop shop for its customer base. The group said in its outlook that the new position in the earth moving market is expected to unlock the group’s capability, infrastructureand expertise to deliver sustainable returns and fulfil value preservation objectives for all its stakeholders.