Zimplow Holdings Limited (ZIMW.zw) 2021 Annual Report
Zimplow has continued to transform, making positive steps to build for the future and at the same time delivering pleasing financial performance. The strategic actions taken by the Board and Management have begun to bring the desired results in terms of positioning the Group for growth ensuring Zimplow becomes the largest capital equipment solutions provider within Zimbabwe and beyond our borders. The completion of the acquisition of Scanlink and Trentyre, together with the supporting back-up infrastructure during the year 2021 is yet another significant milestone towards bringing value both to our shareholders and customers.
As a result of the various threats and opportunities currently obtaining in the market, the Board is constantly evaluating options available for the Group to sustainably deliver tailor-made value to both internal and external stakeholders.
Zimplow delivered a strong and encouraging financial performance by growing revenue by 54% for the financial year ended 31 December 2021 in comparison to the prior year performance in inflation adjusted terms. In addition, the operating profit for the year under review grew by 222% in comparison to the prior year performance. This encouraging financial performance was achieved by volumes growth from all the group’s business units, with Farmec and Barzem posting record performances.
The trading environment has continued to pose both opportunities and threats. The year 2021 saw major supply chain distortions to our recently acquired businesses, that is, Trentyre and Scanlink. The supply chain distortions were caused by Covid-19 induced movement restrictions, which in turn affected supply of freight services. In addition, the Group faced challenges in the timely remittance of payments to foreign suppliers. We are however quite pleased with the manner in which the Group responded to the various challenges from the trading environment.
The year commenced on a positive trajectory. However, lower than expected rainfall patterns during the 2021 rainy season adversely affected the agriculture-based value chain. This circumstance was further exacerbated by acute foreign currency challenges, heightened inflation risk, causing exponential increases in operating costs. The above stated challenges resulted in the Group placing considerable focus on balance sheet preservation as well as constant engagement of internal and external stakeholders. Tactically, the Group has continued to prioritise its engagements with suppliers and Original Equipment Manufacturers (OEMs). The Group continues to take positions on strengthening working capital elements in order to drive growth and market positioning.
The Group has made considerable progress in various facets of the business inter alia human capital development, face lifts of branches of Group entities, improvements in general back up infrastructure and factory capacitation. Strategically, the Group is realigning itself, in order to take advantage of the Group synergies and delivery of a wide range of services entrenching the Group’s ambition as a one-stop shop for its customers. To sustain this ambition, the Group has restructured its operating model. The new operating structure will give rise to a new operating model focusing on market segments and/or clusters that we operate in namely, the Agriculture, Mining & Infrastructure and Logistics and Automotive clusters.
The Group has continued to place emphasis on business performance with a particular focus on increasing business volumes, enhancing operating profit, net asset value (NAV) growth in real terms as well as effective cash flow management. In line with the Group’s restructuring initiative, the operational performance of the Group shall be reported on a Cluster approach.
Farmec posted an impressive performance growing volumes across all its main product lines. Farmec grew volumes for tractors by 48%, tractor drawn implements by 56%, parts sales by 30% and service hours by 22% in comparison with prior year. This resulted in overall revenue growth of 48% and a growth in the Company’s operating profit by 69%, in real terms against prior year performance.
The business unit is steadily growing towards being the leading distributor of agricultural equipment in Zimbabwe. The focus is now on achieving convenience for our customers from an aftersales perspective through a highly engaged back up support team.
Mealie Brand recorded a growth in volumes in local implements sales of 10% against prior year performance. There was significant growth in sales of hoes of 138% against prior year, mainly driven by improved capacity at the factory. The lower-than-expected rainfall pattern during the rainy season had an adverse impact on land preparations resulting in a slowdown of demand in local spares by 22% against prior year performance. On the positive, the board is pleased with the growth in export implements and spares volumes of 44% and 75% respectively.
Overall implement sales volumes grew by 21% and spares by 3% against prior year, anchored by export performance in the year under review. Mealie Brand therefore grew its revenue by 34% and operating profit by 21% in real terms against prior year performance.
Operationally, the business unit continues to put effort towards improving factory efficiencies in resource allocation and replacement of key capital equipment. The board remains committed to providing products that meet the evolving needs of its customers through investment towards research and product development. In addition, management have sought to align the distribution network in order to deliver convenience to our customers.
Logistics and Automotive Cluster
The business unit recorded a strong performance despite numerous headwinds attributable to Covid-19 induced supply chain disruptions which negatively impacted the operations of Scanlink. Parts sales grew by 30% driven by strong demand after the realignment of our supply chain model, which made our business extremely competitive and convenient to our customers. Hours also grew by 4% against prior year. As a result of the positive execution of the renewed supply chain model, Scanlink increased its revenues up by 15% and operating profit by 145% in real terms against prior year.
The outlook for the financial year 2022 looks brighter and the business unit is looking to follow through on the considerable backlog in truck and bus orders from the previous year.
The business unit recovered from a challenging first half of 2021 closing the year positively after a staffing and supply chain reorganisation. The volumes of Passenger Car Radial (PCR) tyres grew by 28% against the prior year. This growth in volumes was driven by improved dist