Zimplow hits first profit in six years

Zimplow hits first profit in six years
Published: 01 March 2018
AGRO-industrial group Zimplow last week reported a profit after tax of $3,4 million for the year ending December 31, 2017, its first since 2011.

This was a huge swing from last year's loss of $2,5 million and follows restructuring at the group in the past three years, with changes being made in top management, capital structure and product mix.

Turnover rose by 60 percent to $38,8 million.

In a statement accompanying the group's financials, board chairman Thomas Chataika said the return to profit was on the back of good strategy, supported by a good agriculture season.

"2017 was an important year for the Zimplow group with all our businesses returning to profitability. This was on the back of a good rainfall season, supportive government policies, as well as good internal strategy execution," said Chataika.

The group last recorded a profit of $2,73 million for the year ended December 31, 2011.

In 2015, the company shuffled its top leadership, appointing Mark Hullet as chief executive, taking over from Zondi Kumwenda who left the group after its stock lost 90 percent of its value over three years.

Chataika said the 2017 performance shows the benefits of the group's restructuring efforts over the past three years, which included selling some of the group's dispensable assets to retire a portion of its debt in a bid to lower finance costs.

"We divested out of non-core assets and paid down expensive debt. We now retain more out of every dollar of sales than we did a year ago due to lower finance costs," said Chataika.

The group has also put some effort toward expenditure management which, Chataika said, "has seen the business transition to a lean and efficient structure".

This has had a significantly positive impact on operating margins, with expenses dropping from 10,7 percent of revenues in 2016 to 7,54 percent in 2017. To this end, the group has been rationalising staff, with the head count having been reduced by more than 150 by June 2016.

Chataika said the group has tweaked its product mix, reverting to whole goods, parts and services. The group has also optimised its product mix to increase the contribution of higher margin business.

"We reset the business to its original raison d'etre ― whole goods supported by strong parts and service sales, increasing operating leverage across the businesses through increasing the contribution of higher margin parts and service to total revenues," Chataika said.

The group put restrictions on arrangements for deferred payment associated with foreign suppliers, limiting foreign liability exposure.

"In anticipation of a tightening forex market, we curtailed foreign supplier credit and switched to a prepayment model. This has had the added benefit of achieving high quality sales and a shorter working capital cycle. As a result, the business had a very light average foreign liability exposure of about $150 000 throughout the year," he said. 
- fingaz
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