HomeBusiness DigestTractive power poised for US$43m turnover

Tractive power poised for US$43m turnover

 Paul Nyakazeya

ZIMBABWE Stock Exchange listed Tractive Power is forecasting earnings amounting to US$43 million for the financial year ending August 31 2011 from US$25,9 million recorded during the same period last year.

Tractive group chief executive Charles Nyambuya said the growth would be powered by customer-funded purchases of machinery, vehicles and related component parts which was alleviating the dependency on borrowings.

“We (Tractive) are forecasting a turnover of US$43 million in the year to August 31 from US$25,9 million achieved last year,” Nyambuya said after the group’s AGM last week on Thursday.

“During the same period the group will be budgeting a pre-tax margin of 10%. Low liquidity levels on the market has been impacting negatively  on the group’s ability to effectively implement its restocking programmes, resulting in low levels of available stocks of all products in the sales mix,” Nyambuya said.

Tractive’s business includes marketing and supporting a broad range of machinery and vehicle units. Its division Barzem has a dealer representative agreement for Caterpiller and Hyster equipment, Farmec holds franchises for Massey Fergson, Perkins and implements brands for Monosem, Kongskilde Vicon, Howard and Drotsky while Puzey & Payne handles Peugeot, Mazda, Mitsubishi, VW and Audi vehicles.

Nyambuya said the group would grab any opportunities that can strengthen its business during the current reporting season and going forward as the company moves to benefit from the rebound of the agricultural sector.

“The group is well positioned to deliver value to its stake holders,” Nyambuya said.

The group’s profits in the three months to November 30  2010 was 388% on the previous corresponding quarter on the back of strong demand for branded earthmoving equipment, tractors and generator sets. Turnover was up 76% in the quarter.

Barzem contributed 50% of profits for the quarter under review, while Farmec accounted for 43%. Despite a 50% decline in vehicle sales at Puzey & Payne, the unit recorded a “modest profit” due to a 38% increase in parts sales and 30% rise in service volumes.

Farmec reported a 5% increase in sales of tractors and 1 075% increase in generator volumes and it’s after tax profit was 254% up on the corresponding quarter.

Northmec, the joint venture company which started operations in February last year, saw tractor sales exceed budget for the quarter by 14%.

During the group’s financial year ending August 31 2010, the group’s operating profit increased by 12% to US$619 000. The group had to rationalize its staffing complement in order to re-align operating costs to current revenue streams. Redundancy costs of US$120 000 were paid during the period under review, coupled with a voluntary early retirement exercise.

The group fair value gain amounted to a nominal US$5 000. Net finance costs incurred during the year totaled US$256 000, which were largely due to working capital funding, particularly at the tractor and motor divisions.  The group achieved a profit after tax of US$492 000, up 53% from their previous year.

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