COVID-19 knocks Zimplow exports
FARMING implements manufacturer and distributor, Zimplow Holdings Limited (ZHL) posted nearly 49% reduction in profit after tax to $230,64 million last year owing to COVID-19 lockdown measures that limited its access to export markets.
The reduction was from a 2019 comparative of $451,37 million.
In a statement attached to ZHL’s financial results for the year ended December 31, 2020, ZHL chairman Godfrey Manhambara said export sales were affected by COVID-19-induced lockdowns.
These lockdowns were put in place by governments globally, including locally, to curb the spread of COVID-19 by limiting the possibility of importing the virus from other countries through trade.
“The reduction in export sales and related exchange gains due to COVID-19 lockdowns and the exchange rate stability following the introduction of the foreign currency auction trading system respectively, caused a decline in current year operating profitability by 41% compared to prior year,” Manhambara said.
Despite a knock on export sales, revenue for the period was up about 17% to $2,65 billion in the period under review, from a 2019 comparative of $2,26 billion,
“The group recorded an encouraging performance and results despite the challenges posed by COVID-19 during the year,” Manhambara said.
“Revenues were 17% ahead of prior year driven by growth in volumes across the major product ranges at Farmec, Barzem, CT Bolts and Mealiebrand. Powermec suffered whole goods volumes reduction and exports sales were affected by COVID-19-induced lockdowns.”
During the period, Barzem’s revenue grew by 47% leading to an increase in operating profit of 8%. This positive performance was driven by a four-fold growth in whole goods volumes.
Barzem is the local caterpillar dealer.
For Farmec, that distributes Massey Ferguson tractors and farming machinery, its revenues grew by 13% driven by tractor and implements volumes growth of 30% and 37%, respectively, against 2019.
Manhambara said after sales revenues were 21% ahead of 2019.
“Mealiebrand (farming implements supplier) recovered in volumes with a 20% growth in local implements sold against prior year despite a slow start to the financial year,” he added.
“The business unit maintained its position as the significant driver of the groups’ bottom line with a 33% contribution despite the reduction in export volumes.”
Meanwhile, ZHL’s retail energy solutions provider Powermec saw a 23% drop in revenue against prior year.
“In the current year, demand for power solutions was more linked to prime power requirements rather than standby power as in the prior year where the grid had constant power outages,” Manhambara said.
“Product mix for 2020 was skewed towards the medium-sized range sets compared to the smaller-sized sets in the prior year. Volumes were 20% down compared to prior year as power consumption switched from generators to the grid resulting in operating profit reducing by 50%.”
Fasteners supplier CT Bolts recorded the biggest percentage growth of 180% to close the year on $93 million.
Volumes grew by an average of 55% across all product ranges which ZHL attributes to the change in the management of this business unit.
Total assets grew 20,3% to $2,76 billion in the period under review, from a 2019 comparative of $2,3 billion, mainly driven by inventories, outstanding payments to ZHL from customers, prepayments, and cash and cash balances.
Despite the reduction in profitability, ZHL had $2,28 for every dollar of current debt showing the company was liquid heading into 2021.
ZHL’s chief executive Vimbayi Nyakudya told NewsDay in a separate interview that COVID-19 lockdowns forced the group to focus its business more locally as the lockdowns limited its access to export market.
“We transitioned to a more offensive posture where as much as we were holding on to our cost containment measures, we started to capacitate our business in such a way that we prepared growth ahead in terms of staff motivation including recruiting the right people as well,” he said.
“We started extinguishing expensive borrowings as well because of the interest rate hikes; we focused more on the local market because of the lockdowns and closures of borders. We even roped in some asset financing institutions.”