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Zimplow insulates self against El Niño, softer mineral pricing

DIVERSIFIED firm, Zimplow Holdings Limited (Zimplow) is in the process of insulating itself against the El Niño-induced drought and softening mineral prices, as these challenges will negatively impact its bottom line.

Zimplow provides agricultural, mining and infrastructural engineering quality and innovative equipment solutions.

Under the agricultural segment, it operates its Farmec, Valmec and Mealie Brand business units, whereas, for mining, it owns Tractive Power Solutions, Powermec and CT Bolts.

However, with the El Niño-induced drought expected to lower agricultural output and global mineral prices expected to reduce revenues, companies in both segments are expected to cut capex and thus affect Zimplow contracts.

“The group is expected to face headwinds in FY2024 as a result of the El Niño-induced drought and the corresponding downstream effects thereof, the harsh economic operating environment which is expected to persist into 2025 and the impact of the soft mineral prices resulting in mines retreating or delaying expansion and capital expenditure spend,” Zimplow acting group chief executive officer Willem Swan said in the company’s 2023 annual report.

“However, the group is insulating itself from the effects of these macroeconomic factors through executing its factory capacitation, the launch of the newly-acquired OEM’s [original equipment manufacturer] business turnaround of the loss-making entities as well as embarking on group-wide cost containment measures.”

This comes as the firm was seeking to prioritise its earthmoving and heavy equipment solutions in the mining and infrastructure segments to become a major income earner for the overall business.

“Despite the challenging economic environment as well as the depressed financial performance, the group followed through on the following initiatives which anchored its current year’s strategy: Launch of the Valmec Division which entailed separation of two leading tractor brands under Zimplow, the Massey Ferguson and the Valtra brands, to operate as two separate product offerings,” Zimplow chairperson Godfrey Tsikayi Manhambara said.

“Valmec was strategically established with the primary objective of propelling the growth trajectory of the Valtra brand as well as to offer alternative farm equipment and cost-effective aftersales solutions to the group’s customers. Successful establishment of the Trentyre Harare branch, thereby decentralising processes and enhancing motoring customers’ experience through greater convenience.”

In the year ended December 31, 2023, the group recorded a 29% reduction in revenue to US$32 million from the prior year.

According to the firm, the drop in revenue was due to its former earthmoving equipment firm, Barzem, not trading during the year following the termination of its Caterpillar distributorship agreement in September 2022.

Caterpillar, also known as CAT, is an American construction, mining and other engineering equipment manufacturer.

“The acquisition of Barloworld Equipment UK’s 49% shareholding in Barzem Enterprises (Pvt) Limited by Zimplow was successfully completed. Barzem became a wholly-owned subsidiary with effect from March 2024,” Zimplow said.

“This business unit is earmarked to become a property holding company following the conclusion of the above-mentioned transaction. Tractive Power Solutions will utilise the entirety of Barzem’s infrastructure in its operations.”

The lower revenue recorded last year was also due to the late onset of summer rainfall of the 2023/4 cropping season that dampened demand in Zimplow’s agricultural cluster.

Lastly, the impact of the economic headwinds resulted in a contraction in customer spending across the group.

Source | NewsDay

https://www.newsday.co.zw/business/article/200028828/zimplow-insulates-self-against-el-nino-softer-mineral-pricing

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