Zimplow seeks to contain costs

AGRICULTURAL equipment manufacturer Zimplow says it is proceeding cautiously as it approaches the second half of the year, prioritising cash generation, cost reduction, and balance sheet maintenance.

In a trading update presented at the annual general meeting last week, Zimplow chief executive Vimbayi Ndakudya said the group would follow through in establishing capacity in factories, efficiencies in new operating units and safeguarding its market share in the depressed trading environment.

This came at a time when the group’s financial performance across all its operating segments was characterised by macro-environmental headwinds which affected sales of equipment in the five months to May 2023.

“The diversified group structure, however, helped reduce the impact of the slowdown in demand as group revenue (excluding Barzem operations) was 4% ahead of the prior year,” he said.

“Scanlink, Powermec and Trentyre all recorded significant growth in revenues. Costs remain contained on a year-to-date basis with a focus to unlock operating margins which are currently below the group’s targets.

“The board and management will, however, continue to implement capacity development initiatives that will allow the group to deliver sustainable performance in the long term.”

Ndakudya said sales volumes under Mealie Brand saw local implements improving by 70% in comparison to prior year.

The sales volumes for the export market, however, reduced by 38% in comparison to the same period in 2022.

She added: “The good performance on the local market had an equally offsetting effect on the export shortfall as revenue was level against prior year, while the business unit swung from a loss position in the prior year to profit during the period under review.

“For Farmec, implements sales increased by 15% against the prior year’s performance for the period under review. After sales performance continued to improve with a 3% growth from prior year.

“Tractor volumes, however, declined by 34% in comparison to the same period last year as farmers were adjusting to the constrained trading environment.”

Farmec is currently focused on positioning itself as the high-technology unit of the group to support the flagship agricultural equipment segment.

Nyakudya said Zimplows’ new business unit, Valmec, was making notable inroads in terms of business penetration in existing and new markets as it positions itself as the alternative for entry-level and as well as emerging farmers.

“Two tractor units and 78 implements were sold in the period under review. The good performance on implements is mainly due to the affordability of the second-tier range of implements on offer from Valmec.

“Parts sales are improving and are expected to increase as the business unit increases its presence on the market.”

Logistics and automotive equipment unit Scanlink experienced significant improvement in the delivery of whole goods in the period under review.

Hence, Nyakudya said truck and bus sales were 50% ahead of prior year’s performance.

Service hours and parts recorded negative variances of 2% and 14% respectively, in comparison to prior year performance.

“The parts business is expected to improve due to increased product support initiatives targeted at improving customer experience. Trentyre volumes in retreads for commercial tyres recorded a growth of 23% in comparison to the prior year same period.

“The increased factory capacity by 33% has greatly improved production levels and resultantly service delivery to our valued clients,” he said.

New tyre volumes were 10% below prior year performance due to constraints in the supply chain.-newsday