TSL Limited | Group Abridged Reviewed Results For The Six Months Ended 30 April 2024

CHAIRMAN’S STATEMENT

REVIEW OF OPERATING ENVIRONMENT

The operating environment remained complex characterised by inflationary pressures and liquidity challenges in the market. The inflationary pressures prompted the Reserve Bank of Zimbabwe on 5 April 2024 to introduce a new currency, the Zimbabwe Gold (ZiG) backed by gold and foreign exchange reserves.

The El Nino weather phenomenon caused delayed onset of the rainy season coupled with severe heat and long dry spells which negatively impacted production in the agriculture sector. On the 3” of April 2024, the Zimbabwean Government declared a state of national disaster due to the devastating drought as more than 80% of the country received below normal rainfall.

The tobacco marketing season commenced on 13 March 2024. National tobacco crop sold by end of April 2024 was 18% below prior year at 95.3 million kgs. The average tobacco price remained firm at US$3.58 per kg, 19% ahead of prior year average price. Indications are that the national tobacco crop size for 2024 will be lower than prior year by 20%-25% due to the impact of the El Nino induced drought.

PERFORMANCE OVERVIEW

The Group changed its functional currency to United States Dollar (USD) at the beginning of the financial year. The half year financial performance has therefore been presented in USD and considerations made in coming to this decision have been detailed on Note 2.1.

Revenue of US$19.9million generated during the period was 7% below last year. The Group was affected by the dry weather which resulted in lower volumes in the agriculture cluster of the business. The dollarisation of the economy in the period resulted in higher operating costs. A rigorous rationalisation and optimisation exercise is currently underway to curtail cost expansion.

VOLUMES OVERVIEW

AGRICULTURAL OPERATIONS

Packaging

Hessian volumes were 18% below comparative period due to the reduction in national tobacco crop as farmers battled with the drought. Tobacco paper volumes were 40% ahead of prior year as the market continued to respond positively to the locally coated tobacco paper. The company started exporting tobacco paper into Zambia in the first quarter of the year.

Agricultural trading

Agricura’s volumes were depressed during the period compared to prior year reflecting the impact of the El Nino induced drought. The strategic move to increase production in the unit is progressing well with the animal health remedies plant under construction and anticipated to be completed in the second half of the year.

Farming operations

Tobacco yields achieved were satisfactory whilst the banana plantation was affected by the drought. In response to the dry spell, the winter cropping plan was significantly reduced to accommodate all crops under irrigation.

MARKETPLACE OPERATIONS

Tobacco-related services

The strategy to serve the much larger contracted tobacco market is yielding fruits, with 83% of the total volumes handled coming from this segment. Tobacco contract volumes were 7% below prior year and independent auction volumes were 57% below prior year. The independently funded tobacco crop market size continues to shrink and represented 6% of the national tobacco crop in the period. The reduction in estimated national crop size has a direct impact on the volumes that are handled through the Company’s floors.

Commodities Exchange

ZMX is in its infancy, and it is expected that the trading volumes will increase as the country imports grain to cover the gap caused by the drought.

LOGISTICS OPERATIONS

End to end logistics services

The logistics business recorded improved volume growth in the period due to the new business model, which supports the customer throughout the value chain. The rail service from both Maputo and Beira continued to operate and performance to date was satisfactory. Tobacco handling volumes were 26% ahead of comparative period due to improved volumes from existing clients. General cargo handling volumes were 47% ahead of comparative period due to increased fertilizer received via the Beira corridor. General cargo storage volumes were 64% below prior year as most commodities are received by customers on a just-in-time basis. FMCG distribution volumes were 22% ahead of prior year due to increased business from existing customers. Forwarding volumes remained strong due to improved volumes from existing customers.

Premier Forklift hours were 5% ahead of the comparative period as the business continues to effectively serve its clients. Forklift sales were significantly ahead of the prior year as most customers resumed investing in capital expenditure in the period.

Vehicle rental services

Rental days were 6% below prior year attributable to a reduced fleet size.

REAL ESTATE OPERATIONS

The level of voids across the cluster remains satisfactory due to improved demand for warehouse space. The Group completed the construction of a new world class 15,000 square meter warehouse at a prime location.

OUTLOOK

The Group will continue to pursue key strategic initiatives in line with its “moving agriculture” strategy.

The afore-mentioned challenges in the operating environment are expected to persist. Cost containment and cash flow management will be a priority for the rest of the year.

DIVIDEND

The Directors deemed it prudent not to declare a dividend for the six months ended 30 April 2024.

For and on behalf of the Board

A.S. Mandiwanza
(Chairman)

25 June 2024

TSL Limited Group Abridged Reviewed Results For The Six Months Ended 30 April 2024.pdf