ZIMPLOW Holdings Limited (ZHL) recorded a 5% and 48% growth in revenue and profitability, respectively, in the first quarter as the company leans ‘pockets of opportunities’ in the market.
ZHL, a manufacturer and distributor of equipment in agriculture, mining, construction and power systems sectors, says despite foreign currency challenges in the first quarter it managed to take advantage of arising opportunities.
In its first quarter trading update for the year, ZHL said it had experienced various problems due to the inflationary environment that rose 72,2% by the end of the period from 60,7% in December 2021.
“The group recorded a 5% and 48% growth in revenue and profitability in real terms respectively, despite the challenges obtaining in the domestic operating environment,” ZHL said.
“The board is encouraged by the resilient performance as Management continues to take advantage of pockets of opportunities in the market given the diversified structure of the group.”
ZHL said the first quarter of 2022 was characterised by foreign currency shortages culminating in exchange rate volatility and inflationary pressures, proving that the forex auction platform is moot.
Of all its segments, foreign currency shortages resulted in depressed volumes at ZHL’s earthmoving equipment subsidiary, Barzem, that was down 88% from the 2021 first quarter.
“The rate of inflation rose to 72.2% in March 2022 from 60.7% in December 2021. On the agricultural side, the softening of producer prices, together with the lower-than-expected rainfall for the 2021/22 season affected yields which gave rise to reduced disposal income by the farmer,” ZHL said.
“In addition, the Russia/Ukraine conflict continues to affect supply chains which in turn have resulted in a significant increase in input and operating costs, especially for those relying on fuel and fertilisers in their value chains. The power supply grid has been erratic, resulting in increased reliance on alternative power.”
For its agricultural segment, under its Farmec business unit, ZHL reported that the sale of tractors and implements volumes increased by 53% and 13% respectively. Meanwhile, parts sales and service capacity utilisation increased by 7% and 51%, respectively, against the comparative period.
ZHL’s Mealie Brand unit saw export implement volumes being up 26% in the period under review, from a 2021 comparative, despite local implements volumes dropping by 15% compared to last year.
The local business dropped to erratic rainfall and the hyperinflationary environment.
Under ZHL’s mining and infrastructure division, the CT Bolts division saw tonnage increase by 25% in fasteners sold, compared to the same period in the prior year.
In terms of ZHL’s Powermec subsidiary, a company that supplies agricultural equipment, national power cuts in the first quarter boosted sales.
“Volumes in gen-sets and solar equipment were 44% ahead of prior year whilst capacity utilisation increased by 71%. The top line improved by 230% in comparison to the same period in the prior year,” ZHL said.
Under ZHL’s logistics and automotive segment, its subsidiary, Scanlink, grew revenue by 64% in compared to the 2021 first quarter, on the back of a strong after-sales performance.
Meanwhile, Trentyre’s performance came at the back of significant supply chain realignments took a 14% drop in revenue as company recorded 21% growth in off the road tyres, lower than prior year performance for the commercial and consumer tyres.
“The steps taken by the Board which included the realignment of the Executive Management structure to Group strategy and the leveraging upon Group synergies has propelled the Group to a position of being a one stop shop for its customer base,” ZHL said, in an outlook.
“In addition, the new positioning in the earth moving market is expected to unlock the Group’s capability, infrastructure and expertise to deliver sustainable returns and fulfil value preservation objectives for all our stakeholders.”