End of Bazerm dealership weighs down Zimplow

Zimplow Holdings says the discontinuance of Barzem operations following the termination of the Caterpillar dealership in September 2022 resulted in group’s profitability swinging from an operating profit to a loss before tax of $1 billion for the 2022 financial year.

Zimplow used to hold the Caterpillar local dealership in Zimbabwe through its unit Barzem Enterprises, which is now seeking new supplier partnerships.

The company said the loss position was largely a result of transaction provisions of $7,4 billion, made up of stock write-downs of $6,4 billion, exchange losses of $0,5 billion and retrenchment costs of $0,5 billion.

Group chairman Mr Godfrey Manhambara, commenting on the group’s 2022 financials said the board is following through on protecting shareholder value by acquiring Barloworld’s 49 percent shareholding in Barzem at a discount in line with the remedies provided in Barzem’s shareholder agreement.

“Overall, the continuing operations recorded a resilient performance which we are now building on going into financial year 2023,” he said.

Zimplow is engaged in diversified mining, construction, and infrastructure. The company is also an agricultural equipment manufacturer and distributor.

Mr Manhambara said the group started the year on a positive note, with strong demand being experienced on all three segments.

However, the impact of the drought experienced in the second half of the 2020/21 season significantly slowed down the demand for the firm’s agriculture equipment products.

“The mining and construction equipment would perform, and given the strong metal and mineral prices,” he said.

He added that financial year 2022 had been projected to be a strong year before the termination of the Caterpillar distributorship by Barloworld.

“Whilst there was growth in the logistics and automotive segment, the performance recorded was not enough to cover the gap caused by the termination of the CAT dealership as initially projected,” said Mr Manhambara.

In terms of cluster performance, under the agricultural equipment cluster, Mealie Brand’s export sales performance anchored the business unit’s 2022 volume growth.

Implements sold in the export market were 36 percent ahead of the prior year with the local market performing at 16 percent below prior year.

“The same trend was also observed on hoes and implements spares where sales volumes grew by 23 percent and 34 percent, respectively against prior year.

“Retooling and capacity expansion continues in earnest as the business unit seeks to expand its product range to cater for small to medium holder farmer mechanisation,” said Mr Manhambara.

At Farmec, following the peak performance for financial year 2021, tractor volumes were reduced by 15 percent with a shift towards the higher horsepower range.

Tractor implements volumes continued to grow with a 4 percent increase from prior year. Mr Manhambara said engagement with key suppliers has been a priority in order to position Farmec’s offering to customers better.

“In addition, the efforts to have a better response rate and customer experience has seen the service hours growing during the period under review by 32 percent,” he said.

Under the logistics and automotive cluster, Scanlink Truck and bus volumes grew by 88 percent and 300 percent compared to prior year mostly driven by the improved supply chain as the business unit finally delivered on long outstanding orders.

“As a result of the fleet replacement, there was reduced fleet maintenance business compared to prior year, with parts and hours sold dropping by 11 percent and 5 percent respectively.

“With internal reorganisation complete, as well as improvements in the supply chain, the business unit is poised to grow,” said Mr Manhambara.

Trentyre Good Year new tyre sales improved by 2 percent during the year despite the internal reorganisation and supply chain gaps.

He said the business unit is expected to complete the facelifts and branding of its branches towards the end of H1 2023 to set Trentyre onto a new trajectory.

He added the optimisation of the retreading factory started to bear fruits with a 40 percent growth in retreads produced.

For the mining and infrastructure equipment, Barzem/ Tractive Power Solutions (TPS) has evolved from ZEMCO, Barzem and now TPS to cater for Zimbabwe’s earthmoving requirements.

Mr Manhambara said the group now has the capacity in terms of infrastructure, people and access to capital.

“Given the experience in CAT, the group is committed to providing superior service from single unit owners to large fleet operators.

“During the transition from Barzem to TPS, the group has secured affiliations and accreditations with key suppliers to be able to continue looking after our major customer’s huge fleet from an earth-moving equipment perspective.

“This has assisted the business unit to secure service level agreements, repair and maintenance contracts with some of the huge fleet operators – amassing the scale in a short space of time, required to provide effective supply chain solutions and cost-effective maintenance strategies,” he said.

At Powermec the instability of the grid has caused demand for alternative power, generator sets from Powermec in particular, to grow by 16 percent and service hours by 44 percent compared to the previous year.

“The business unit continues to provide solar power installations to complement the alternative power business for selected customers.

“During the year, solar power plants installed were 116 percent more than in the prior year.”
During the year under review, CT Bolts business matched prior year performance in terms of volumes.
However due to pressure on margins, operating profit was down 14 percent compared to prior year.-herald.cl.zw