daniel chigunwe
Business Writer
FBC Securities says TSL Limited’s exposure to various markets and value chains continues to pay dividends for the business by creating financial leverage, regulatory and economic insulation, and resource optimisation.
The group, in its half-year period to April 30, 2024, said it expanded its export footprint by establishing a new tobacco paper market in Zambia as the group sought exposure to various markets.
According to FBC Securities, TSL’s 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 has been satisfactory,” FBC Securities said.
It noted that tobacco handling volumes were 26 percent ahead of the comparative period due to improved volumes from existing clients. General cargo handling volumes were 47 percent ahead of the comparative period due to increased fertiliser received via the Beira corridor. General cargo storage volumes were 64 percent lower than the prior year as most commodities are received by customers on a just-in-time basis.
FBC Securities said increased investments in TSL’s real estate operations, evidenced by the recently completed world-class 15,000-square-meter warehouse and expected growth of activity on the commodity exchange as the country imports more grain, are anticipated to enhance increased profitability for the group in the second half of 2024.
“However, current efforts to manage increased operating costs resulting from the growing rate of dollarisation should be amplified if the gains from the anticipated improved activity are to be realised,” reads the review report.
During the half-year period under review, group revenue of US$19,9 million was 7 percent below last year, largely affected by the dry weather, which resulted in lower volumes in the agriculture cluster of the business.
TSL’s operations span agriculture, logistics, and real estate. During the half-year period to April 30, 2024, the group’s tobacco paper volumes grew by 40 percent compared to the prior year, as the market continued to exhibit a positive response to the locally produced and coated tobacco paper.
However, Hessian volumes declined by 18 percent during the period, attributable to a reduction in the national tobacco crop due to the drought conditions experienced by farmers.
Group chairman Antony Mandiwanza, in a statement of the financials, said under the agriculture trading cluster, Agricura’s volumes were depressed during the period compared to prior year, reflecting the impact of the El Niño-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,” he said.
Mandiwanza said in terms of farming operations, tobacco yields achieved were satisfactory, while 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,” he said.
In the tobacco-related services, Mandiwanza said 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.
He said tobacco contract volumes were 7 percent below prior year and independent auction volumes were 57 percent below prior year.
“The independently funded tobacco crop market size continues to shrink and represented 6 percent of the national tobacco crop in the period. The reduction is estimated,” said Mandiwanza.
Bongani Ndlovu