HomeBusiness DigestZimplow records US$2,7m profit

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Revenue increased by 26% to US$15,5 million with local sales growing by 30% to US$11,2 million while exports grew 16% to US$4,2 million.
“This increase was due to improved local market as well as additional revenue from the new acquisition,” the company said in a statement accompanying the results.

Profit before tax increased by 24% to US$3,6 million despite pressure on profit margins from increasing operating costs.

Zimplow CEO Zondi Kumwenda said  margins were thin due to a 20% increase in employment costs, a 17% fuel price and 33% steel price hike  since January.  Increases in electricity tariffs in the second half worsened the situation, he said.

Kumwenda said that the company missed out on a 5% tax incentive awarded for exporting at least 50% of output after domestic sales outstripped exports. This, he said,  meant an effective tax rate of 25% was applied compared to 20% in the prior financial period.

During the period, the company acquired a 49% stake in African Traction and Associated Technologies (Afritac) for a considerable price of US$552 000 which the company paid through a share issue in Zimplow.

Afritac, which is engaged in import and sale of animal drawn implements and tools, contributed US$1,5 million to group turnover and US$145 000 to profit before tax, over a 10 month period.

Zimplow recorded increases in sales across its three divisions with Mealie Brand recording a 27% increase in sales volumes to 74 000 implements contributing US$3,2 million to group profitability.

Mealie Brand which is the largest of the three divisions is involved in the supply of animal drawn implements and hoes.

Exports grew 8% to 31 000 implements owing to low demand in exports.

Management said the drought in East Africa and delayed seasonal take off in the region impacted on exports.

The division also struggled to compete with cheap products from the Far East.

CT Bolts’ mild steel sales volumes grew by 15% to 146 000 tonnes and contributed US$261 200 to profits. Tassburg sales volumes increased by 47% to 107 tonnes and returned to profitability in the same period contributing a marginal US$18 600.

“The good thing is that we are not losing money anymore in Tassburg. We are happy we are not putting money in a hole,” said Kumwenda.

The company directors have proposed a final dividend of US0,27 cents which is payable out of the profits of the group for the full year to December 31 2011.

Management sees sales growing 20% in the current financial year, adding the company was pursuing growth strategies that would improve both local and regional competitiveness.

“We are looking at being competitive in some ways in markets outside Zimbabwe like Angola where we are growing and we have also managed to penetrate into Sudan,” said Kumwenda.

But Kumwenda said performance of Zimplow would be negatively  impacted on by more cost pressures emanating from increased wage demands and full impact of electricity tariff increases to be felt in 2012. The company also expects rainfall patterns in the region to continue to be erratic.

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