Tanganda Tea Company Limited (TANG.zw) HY2022 Interim Report
I am pleased to report that the Company was unbundled out of Meikles Limited on 1 February 2022 and successfully relisted on the Zimbabwe Stock Exchange (ZSE) on 3 February 2022. Tanganda was initially listed in 1963 and remained listed until 2008 when it delisted following the merger with Kingdom Financial Holdings, Cotton Printers and Meikles Africa Limited.
Operating Environment Overview
The operating environment has been characterized by high inflation and exchange rate volatility. Annual inflation which receded to 51% in September 2021 has been increasing and ended on 73% in March 2022. Post reporting period inflation in April 2022 rose to 96%.
There was a significant reduction in Covid-19 fatalities across the world and the impact of the virus waned resulting in relaxation of pandemic related restrictions. The Company was categorized an essential service and continued to operate during lockdown restrictions in 2021.
Towards the end of the reporting period, geopolitical instability between Russia and Ukraine broke out on 24 February 2022 resulting in broader ramifications in respect of global inflation and increased costs of commodities.
Commentary on financial performance is based on inflation adjusted figures with historical cost figures referred to in order to enhance comprehension and analysis.
Inspite of negative dry weather in December 2021 and February 2022, pandemic and global conflict headwinds, revenue remained resilient at ZWL 1.909 billion 7% down from ZWL 2.061 billion achieved same period of the previous year. Timing of revenue recognition from export of macadamia nuts has resulted in the seeming decline in revenue. The macadamia export market is gravitating towards kernel instead of the traditional nut in shell and the revenue from these exports will be recognized in the second half of the financial year. In historical cost terms, there was a 53% growth in revenue to ZWL 1.664 billion from ZWL 1.089 billion in the prior year.
Profit before tax for the period in inflation terms amounted to ZWL 589 million compared to ZWL 749 million achieved prior year. Profitability was adversely affected by the disparities between increase in production costs and movement in exchange rate. The exchange rate depreciated by 69% during the period under review versus year on year inflation of 73%. In historical cost terms profit before tax grew by 36% to ZWL 1.265 billion from ZWL 929 million in the prior year.
Review of Operations
Although bulk tea production for the period of 5 935 tonnes was 12% below prior year production of 6 762 tonnes due to dry weather in December of 2021 and February 2022, bulk tea exports of 3 747 tonnes were 14% above 3 278 tonnes sold in the comparable period of last year. The export average selling price firmed up slightly to US$1.43 per kg from prior year average selling price of US$1.41 per kg. Avocado and macadamia harvest commenced in earnest at the end of the reporting period and the revenue is recorded in the second half of the financial year. Coffee exports of 96 tonnes were 14% above 84 tonnes achieved in prior year. Average export selling price of US$6.67 per kg remained slightly firmer than US$6.50 realized prior year. The Company is realizing the benefit of its diversified operations.
The pandemic and global conflict created global logistical and supply challenges but packed tea sales volumes were resilient at 933 tonnes 4% below 1 033 tonnes in prior year.
Yields of avocado and macadamia are expected to increase with enhanced maturity profiling of plantations over the next
three to five years.
The solar plants constructed at three of the five estates have significantly reduced reliance on power from the national grid. Further benefits from the investment are expected to be fully realized once full reticulation and net metering have been implemented before the end of 2022.
The Company has invested in new machinery at the packaging factory in Mutare in line with its value addition strategy and factory conversion efficiencies. The investment is expected to grow volumes in the regional market.
Mr. John R. T. Moxon retired from the Board of Directors after an illustrious service spanning over five decades. His contributions in the earlier growth of the tea business and later diversification program are greatly appreciated. The Board welcomed new independent non-executive Directors; Messrs Stewart P. Cranswick, Livingstone T. Gwata, Simon J. Hammond, Matthew J. S. Moxon, and Ms Rufaro A. Maunze appointed with effect from 30 July 2021.
The Board of Directors declared an interim dividend (Number 1) of ZWL 50 cents per share to be paid on 14 July 2022.
I would like to extend my appreciation to all our stakeholders for their continued support. I also extend my appreciation to my fellow Directors and to management and staff for their dedication and commitment.