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Enacy Mapakame
THE management of agricultural and earthmoving equipment supplier Zimplow Holdings Limited is upbeat that the drive to capacitate its agriculture cluster will enhance performance despite the adverse impact of the El Niño weather phenomenon on agriculture and downstream industries.
The agriculture cluster — which comprises Mealie Brand, Farmec and Valmec business units — is undergoing capacitation, with new equipment expected to be commissioned during the third quarter of the current financial year.
Prior to this, Zimplow has been reviewing and refining the supply chain, as well as production efficiencies, to reduce the cost of production of farming implements.
These initiatives are also meant to offset the effects of subdued demand experienced during the past year due to bad weather patterns.
“We experienced late onset of summer rainfall in the 2023/2024 cropping season, which dampened demand in the agriculture cluster and the impact of the economic headwinds resulted in a contraction in customer spending across the group,” revealed acting chief executive officer Mr Willem Swan.
“Despite the adverse economic environment, the severe damage caused by the drought, and the reported financial performance, the group is executing strategic initiatives to ensure the sustained growth of the business.
“The capacitation project is expected to result in improved factory efficiencies and increased capabilities as the business seeks to expand its product offering for both agricultural implements and mining consumables.
“This initiative is expected to anchor the business’ sustainability and profitability in the near future.
He added that the Farmec business unit (BU), specifically, is at an advanced stage towards the introduction of a comprehensive financing solution with a local financial institution for the benefit of its existing and prospective customers.
Furthermore, the BU is following through on demand management by refining its supply chain.
During the past financial year, Farmec was severely affected by the liquidity crunch and the late onset of the rainy season, resulting in hours sold being 37 percent below the prior year.
Other challenges like import costs and price reviews put pressure on margins.
Mr Swan said Zimplow remains committed to serving farmers, given the role the agriculture sector plays in the economy.
The launch of the Valmec business unit on September 29, 2023 is also another initiative towards bolstering the agriculture sector.
By the end of the year, the unit had sold six tractors and 92 implements.
The management is confident they will reach the alternate target market, which was previously unattended to by the existing group’s business unit.
“The drive on tier-2 implements and aftermarket parts sales growth is expected to strengthen the business unit’s portfolio further,” said Mr Swan.
Meanwhile, the group is also consolidating its market share in the mining and infrastructure cluster with the introduction of a new original equipment manufacturer, Develon, to replace the Caterpillar (CAT) distributorship.
Its new business unit, Tractive Power Solutions (TSP), which was launched last year, was instrumental in the establishment of the new distributorship with Develon.
TPS has also successfully negotiated a FAW distributorship, which will enhance the group’s capabilities in the mining and logistics industry.
According to the group, the FAW brand offers a wide range of well-priced trucks and buses suited to the tough African conditions.
At the same time, during the year to December 31, 2024, Zimplow’s revenue stood at US$32 million, representing a drop of 28 percent from the prior year level, as Barzem did not trade due to the termination of the CAT distributorship agreement in September 2022.
The late onset of summer rains in the 2023/2024 cropping season dampened demand in the agriculture cluster and the effect of the economic headwinds resulted in a contraction in customer spending across the group.
As a result, a profit before tax of US$0,68 million was 74 percent below the prior year.
Profit for the year went down to US$559 000 from US$918 000 recorded during the comparable year.
Total assets dropped to US$46,2 million from US$47,7 million recorded in the prior year.
While the environment is expected to be challenging due to the El Niño-induced drought and the corresponding downstream effect thereof and the impact of the soft mineral prices that have resulted in mines retreating or delaying expansion and capital expenditure spending, management is still upbeat of its FY24 performance.
“The group is insulating itself from the effects of these macro-economic factors. Management is confident that through executing its factory capacitation, the successful launch of the newly acquired OEM and the strategic business turnaround of the loss-making entities, as well as embarking on a group-wide cost containment programme, it will show commendable growth in revenue generation and profitability in 2024,” said the Mr Swan.
Online Reporter