TSL profit shrinks on drought impact
The dry weather conditions experienced across the country and the region due to the El-Nino weather phenomenon had a knock-on effect on agriculture-focused TSL Limited’s financial performance for the half year to April 30, 2024.
The El Nino weather phenomenon caused delayed onset of the rainy season coupled with severe heat and long dry spells which negatively impacted production in the agriculture sector.
On April 3, 2024, the Government declared a state of national disaster due to the devastating drought as more than 80 percent of the country received below-normal rainfall.
TSL said revenues and profitability went down during the period, compared to the same period in the prior year as the bad weather condition weighed on the agriculture sector.
Profit for the period went down by 43 percent to US$3,6 million from US$5,9 million recorded during the same period in the prior year.
Revenue of US$19,9 million generated during the period was 7 percent below last year’s US$21,5 million.
“The group was affected by the dry weather which resulted in lower volumes in the agriculture cluster of the business. The dollarisation of the economy in the period resulted in higher operating costs,” said group chairman Mr Anthony Mandiwanza in an update accompanying the group’s financials.
“A rigorous rationalisation and optimisation exercise is currently underway to curtail cost expansion,” he said.
This also comes as the period under review was challenging, characterised by inflationary pressures and liquidity challenges in the market.
Apart from the economic headwinds, natural factors such as bad weather have also been challenging for the business’ agriculture cluster.
The national tobacco crop sold by the end of April 2024 was 18 percent below the prior year at 95,3 million kilogrammes although the average tobacco price remained firm at US$3,58 per kg, which was 19 percent ahead of the prior year’s average price.
However, indications are that the national tobacco crop size for 2024 will be lower than the prior year by 20 percent to 25 percent due to the impact of the E Nino-induced drought.
In terms of operations, Hessian volumes were 18 percent below the comparative period due to the reduction in the national tobacco crop as farmers battled with the drought.
Mr Mandiwanza added that tobacco paper volumes were 40 percent ahead of the prior year as the market continued to respond positively to the locally coated tobacco paper. The company started exporting tobacco paper into Zambia in the first quarter of the year.
At Agricura, volumes were depressed during the period compared to the prior year reflecting the impact of the El Nino-induced drought. The strategic move to increase production in the unit is progressing well with the animal health remedies plant under construction and anticipated to be completed in the second half of the year.
Under farming operations, tobacco yields achieved were satisfactory whilst the banana plantation was affected by the drought. In response to the dry spell, the winter cropping plan was significantly reduced to accommodate all crops under irrigation.
As for marketplace operations under tobacco-related services, the strategy to serve the much larger contracted tobacco market is yielding fruits, with 83 percent of the total volumes handled coming from this segment, according to Mr Mandiwanza.
Tobacco contract volumes were 7 percent below the prior year and independent auction volumes were 57 percent below the prior year.
The logistics business recorded improved volume growth in the period due to the new business model, which supports the customer throughout the value chain.
The rail service from both Maputo and Beira continued to operate and performance to date was satisfactory. Tobacco handling volumes were 26 percent ahead of the comparative period due to improved volumes from existing clients.-herald
