Zimplow operating profit jumps 222%
Mining and agriculture implements supplier, Zimplow Holdings Limited’s operating profit jumped 222 percent to US$434 million, as overall performance for the year to December 31, 2022 remained driven by improved volumes across business units.
Revenue for the year jumped 54 percent to US$6,6 billion compared to US$4,2 billion achieved in the prior year.
While group operating profit vaulted 222 percent, profit for the year rose modestly at 25 percent to US$434 million compared to US$345 million achieved in the prior year.
“This encouraging financial performance was achieved by volume growth from all the group’s business units, with Farmec and Barzem posting record performances,” said chairman Godfrey Manhambara in an update for the year under review.
The period under review was however affected by Covid-19 induced challenges which resulted in the group’s recently acquired businesses, Trentyre and Scanlink experiencing supply chain distortions.
“In addition, the group faced challenges in the timely remittance of payments to foreign suppliers. We are however quite pleased with the manner in which the group responded to the various challenges from the trading environment.
“The year commenced on a positive trajectory. However, lower than expected rainfall patterns during the 2021 rainy season adversely affected the agriculture-based value chain. This circumstance was further exacerbated by acute foreign currency challenges, heightened inflation risk, causing exponential increases in operating costs,” said Mr Manhambara.
Under the agriculture cluster, Farmec grew volumes for tractors by 48 percent, tractor-drawing implements by 56 percent, parts sales by 30 percent and service hours by 22 percent in comparison with prior year.
This resulted in overall revenue growth of 48 percent and a growth in the company’s operating profit by 69 percent, in real terms against prior year performance.
Mealie Brand also recorded a growth in volumes in local implements sales of 10 percent against prior year performance.
There was a 138 percent growth in sales of hoes against prior year, mainly driven by improved capacity at the factory.
Mr Manhambara however said the lower-than-expected rainfall pattern during the rainy season had an adverse impact on land preparations resulting in a slowdown of demand in local spares by 22 percent against prior year performance.
“On the positive, the board is pleased with the growth in export implements and spares volumes of 44 percent and 75 percent respectively. Overall implemented sales volumes grew by 21 percent and sales by 3 percent against prior year, anchored by export performance in the year under review. Mealie Brand therefore grew its revenue by 34 percent and operating profit by 21 percent in real terms against prior year performance,” he said.
As for the mining infrastructure business, Bazerm achieved record volumes performance driven by strong business from Emergency Road Rehabilitation Programme (ERRP) which resulted in increased demand for earth moving equipment with sales growing by 84 percent against prior year performance.
On the other hand, the focus on production by major mining houses who use CAT surface mining and handling equipment resulted in increased fleet maintenance.
Consequently, parts sales grew by 75 percent and hours sold by 65 percent against prior year performance. Revenue therefore grew by 102 percent whilst operating profit was 109 percent ahead of prior year performance.
However, the challenges in foreign currency remittance experienced in the fourth quarter of 2021 slowed down business volumes.
CT Bolts achieved volume growth of 48 percent against prior year as the business has been making steady progress in asserting its dominance in the fasteners industry.
For Powermec, the year under review was a relatively stable year from a power supply perspective on the main grid, hence the reduced demand for alternative power products.
Generator units sold remained subdued with a 16 percent drop from the prior year. However, the performance of Powermec’s new solar product range was encouraging as the business unit achieved a 167 percent growth against prior year.
The strong after sales performance grew parts sales by 72 percent and service hours by 22 percent against prior year, driving both revenue and operating profit up by 30 percent and 7 percent respectively in real terms, compared to prior year performance.
Management anticipates strong performance by the solar energy range products in the current financial year and going forward.
The group will also continue to strengthen its capability and capacity to respond to changes in the operating environment and undertake stakeholder management in a holistic and robust manner with respect to suppliers and customers in order to deliver superior value to our Shareholders. Zimplow declared a final dividend of 35,40 cents per share.
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