Zimplow Ltd profits in the full-year to December 31 2012 will be lower compared to the corresponding period the prior year owing to low disposable income, thin margins from exports and inherited expensive debt from Tractive Power Holdings business units, the company said.
Report by Nqobile Bhebhe
In a profit warning statement published this week, company secretary Design Mkhonto said shareholders should exercise caution when dealing in the shares of the company.
“The board of directors of Zimplow wishes to inform the shareholders of the company and the investors that the results of the group for the financial year ending December 31 2012, will be below those achieved in the corresponding previous financial period ending December 2011,” said Zimplow.
Group revenue for the year increased by 26% to US$15,5 million in the full-year to December 31 2011.
This increase was attributed to improved local market as well as additional revenue from the new acquisition.
Zimplow, which bought out Tractive Power Holdings (TPH) minorities, cited the absence of long-term financing facilities, low disposable income and poor 2011/2012 farming season.
“A poor 2011/2012 agricultural season characterised by poor harvest and cotton price wars that saw local sales units dropping, low disposable income and the tight liquidity in the market also continued to affect local revenues,” said Zimplow.
Zimplow said its agricultural division relied heavily on exports which traditionally have thin margins because of competition from the East.
Absence of long-term financing facilities affected the performance of some of the former TPH business units which had been financed through expensive short-term debt.
“The significance of the above factors coupled with acquisitions and restructuring costs of TPH, resulted in a less satisfactory financial performance than anticipated,” the company said.
The group said it was in the process of “realigning its operations into agriculture, mining and infrastructural equipment” as a supplier representing world-class brands at the same time working on an accelerated reduction of inherited expensive debt.