TSL wary of US dollar inflation
DIVERSIFIED firm TSL Limited says it is closely watching the growing US dollar inflation being witnessed in the market to ensure the group’s operations remain sustainable.
The US dollar inflation is a new term which refers to increased demand for the greenback as consumers convert the currency on the black market.
This has been made worse by Statutory Instrument 127 of 2021 which effectively bars and penalises the pricing of goods above the official auction rate.
The statutory instrument, business has warned, will result in increased prices which will fuel inflation and wreak havoc in the economy.
“Economic pressures are expected to persist for the remainder of the financial year. US dollar inflation being witnessed in the marketplace will require close monitoring to ensure sustainability of group operations,” TSL chief executive officer Derek Odoteye said.
“New sources of more cost-effective funding are being explored for initiatives to be undertaken in FY 2022. National tobacco volumes expected to be in line with prior year, actual outturn remains to be seen. Agro inputs and tobacco hessian restocking underway — foreign currency availability is key.”
He said during the first half of the year, the operating environment remained complex and uncertain despite the increased usage of the greenback.
“Economic environment remains complex and uncertain. Inflation receded to 194% year-on-year in the period — availability of foreign currency on RBZ auction system and increased market use of US dollar for transacting purposes,” Odoteye said.
“Interest rates on locally denominated borrowings remain unsustainably high.”
During the first half of the year, revenue was up 33% to $1,5 billion from $1,1 billion in the comparative period, while operating profit rose 53% to $545 million from a previous of $355 million.
Profit before tax was up 62% to $582 million from a previous of $358 million.
Earnings before interest, taxes, depreciation, and amortisation, net income, was up 51% to $720 million from $476 million.
In a breakdown of its performance, from TSL’s agriculture operations, the company handled 7,3 million kilogrammes (2,8 million kg — independent auction and 4,5 million kg on contract) with an increased focus on contract handling model.
“TSF successfully opened and are operating decentralised contract handling floors in Karoi and Marondera,” Odoteye said.
The performance was despite tobacco yields being lower than anticipated due to a very dry start to the season followed by incessant rains.
However, TSL is expecting firmer pricing to negate the effects of lower yields going forward.
The TSL group also recorded higher volumes at its Agricura subsidiary (a chemical and pesticide firm) owing to improved product availability, marketing and its strong distribution network which took advantage of improved demand.
“Favourable rainfall pattern increased demand for product offering,” Odoteye said.
He said business would continue to focus on growing local manufacturing capabilities.
In TSL’s logistics operations, tobacco handling volumes were down 11% in the first half of the year owing to a smaller crop in prior year and shorter processing season caused by COVID-19.
General cargo volumes were 31% down from the comparative period.
Under real estate operations, TSL reported an improvement in voids by four percentage points to 8% from 12%.
Odoteye said the group continues to pursue “moving agriculture” strategic initiatives.
“Focus remains on sustainable value creation based on a resilient business with a strong balance sheet,” he said.
The strategy includes continuing to invest in building local manufacturing capacity and expanding exports into the region.
It also includes tobacco-related operations, increasing footprint in decentralised locations for contract handling services; farming operations — winter wheat programme and pursuing expansion of farming operations; logistics operations as well as scaling up the use of Beira and Maputo corridors on road and rail with partners.
TSL also plans to undertake the official launch and operationalisation of the Zimbabwe Mercantile Exchange commodities exchange, where the multicurrency trading of strategic agricultural commodities will take place.
The exchange is a partnership involving Finsec, TSL, CBZ Holdings, and government.
Odoteye said for their real estate operations, they planned to invest more into warehousing.-newsday.co.zw
