Padenga’s strategic shift pays off, diversification boosts profits

Padenga Holdings Limited has continued its impressive journey of diversification, demonstrating remarkable resilience and adaptability in a challenging operating environment.

The company’s interim financial results for the six months ended June, 30 2024 highlight its strategic shift away from a sole reliance on crocodile farming and its successful foray into the gold mining sector.

Chairman Themba Sibanda expressed his satisfaction with the Group’s performance, acknowledging the complexities of the first half of the year, which included regulatory changes, global geopolitical tensions, and economic slowdown. Despite these challenges, Padenga’s management team remained focused on driving growth and improving operational efficiencies across all business units.

One of the most notable highlights of the interim results is the exceptional performance of the mining operations. Dallaglio, Padenga’s mining subsidiary, achieved a 25 percent increase in gold production compared to the previous year. Dallaglio also sold 1,351kgs of gold in H1 2024 compared to 1,080kgs in H1 2023. Dallaglio recorded a profit before taxation of US$13,60 million which is a 159 percent increase from the US$5,25m recorded in the same period in 2023, largely due to increased revenue. A turnover of US$87,68m was achieved, which is a 40 percent increase from US$62,66 million prior year comparative.

This growth was fueled by factors such as improved ore grade, enhanced recovery rates, and higher plant throughput at the Pickstone mine.

The official opening of the Pickstone Underground Mine Phase 1 by President Mnangagwa, marked a significant milestone for Padenga. This underground mine is expected to contribute significantly to the Group’s gold production as open pit mining at Pickstone is phased out.

While the Padenga agribusiness operations experienced a 20 percent decline in skin harvest volumes to 16 973 compared to the prior year, the company’s management has attributed this to the unusual circumstances of the previous period, which included a carryover of skins from the 2022 supply contract.

The comparative period benefited from the harvest of some 10,000 skins carried over from the 2022 supply contract. Consequently, skin sales in the first half of the year at 14,627 skins were 22 percent below the 18,709 skins sold in the same period last year. Resultantly, a profit before taxation of US$0,22 million was achieved, compared to US$2,79 million recorded same period last year.

However, the company anticipates a return to normal harvest levels and skin sales in the second half of the year. Already, the significant improvement in skin quality realized at the end of 2023 continued into the first half of 2024.

Despite the challenges faced by the agribusiness operations, Padenga’s commitment to producing high-quality skins remains unwavering. The company’s focus on premium skin sales and continuous improvements in skin quality has positioned it well in the market.

Consolidated results for the Group were impressive, with a 33 percent increase in revenue to US$99,24 million and a 110 percent increase in EBITDA to US$23,11 million.

The mining operations, particularly Dallaglio, contributed significantly to this growth with a contribution of 88 percent of the revenue. Padenga Agribusiness contributed 12 percent down from 16 percent prior year comparative.

The Group’s ability to generate substantial cash from operating activities is a testament to its strong financial position. The Group generated cash amounting to US$21,02 million (US$12,88 million in H1 2023) from operating activities for the year.

The significant increase in cash generated was mainly due to improved revenues and tighter working capital management.

Looking ahead, Padenga’s prospects remain positive. The company’s ongoing investments in capital projects, such as the Pickstone Underground Mine Phase 2 and the Thickener Project at Eureka Mine, are expected to drive future growth and improve operational efficiencies.

While the recent softening in demand for Nile crocodile skins may present short-term challenges, Padenga’s diversified business model provides a degree of resilience.

“The crocodile operation continues with its initiatives to produce high-quality skins that are consistent with premium market expectations,” Mr Sibanda said.

The continued strength of the gold mining operations and the company’s focus on producing high-quality products are expected to mitigate any potential negative impacts.

According to Mr Sibanda, any shortfall in Nile skins revenue from the softening demand will be more than compensated for by increased Gold sales revenue.

He said overall the Group will report higher profits than previous year.

“We are optimistic about the profit growth for the Group for the remainder of the year as we create long-term value and preserve shareholder wealth.”-ebsinessweekl