Thursday, August 01, 2013

(NEWZIMBABWE) Zimplow on course for $100m turnover
by Business Reporter

FARM implements manufacturer, Zimplow Holdings, says it was on course to achieve US$100 million turnover by 2015 from US$35 million during the year ended December 31, 2012, despite disposing of Puzey & Payne.

The company has, since the beginning of the year, been realigning its units with several restructuring programmes being implemented in a bid to improve efficiencies and bolster profitability.

“The directors of Zimplow Holdings Ltd are pleased to announce the disposal of Puzey & Payne Ltd effective June 1, 2013 to its management who are supported by a strategic partner,” said Zimplow in a note to shareholders.

“The disposal will allow Zimplow Holdings Limited to streamline its operations and focus on its key strategic objectives. The directors obtained an independent opinion from advisors that the terms of the transaction are fair and reasonable to the company shareholders.”
Puzey & Payne had been crippled by the influx of cheap second-hand vehicles, imported mostly from Japan.

The business is essentially a motor vehicle, spares and generators dealer which is also involved in servicing vehicles. The company is also one of the holders of a Peugeot dealership in the country.

The viability of new vehicles market has, in the recent past, been compromised by the influx of used vehicles mostly from Japan that land on the domestic market at hugely discounted prices compared to those of new cars.

Coupled with lack of flexible credit terms and stringent conditions for obtaining bank loans, buying a new vehicle is extremely difficult for the majority of Zimbabweans even those with modest incomes.

In March, Zimplow chief executive officer (CEO), Zondi Kumwenda said the company would pull out of some of its investments but did not disclose which units were on sale.

He said negotiations with financiers to provide tractors and other implements on an asset-based finance scheme were also underway.

The Zimplow CEO said the company's exposure to agriculture and mining at a much bigger scale would present avenues for product diversification to achieve the turnover target.

The group's revenue for the year to December 31, 2012 was at US$35,6 million, against US$15,5 million recorded in the prior year.

It was boosted mainly by strong results from Tractive Power Holdings, which was taken over by Zimplow last year. Profit before tax was down 127 percent and this was mainly due to restructuring expenses of US$1,9 million.

Finance director, Francis Rwakonda, said revenue for Zimplow was down 13 percent and profit before tax also declined by 96 percent.

"This was mainly due to the interest cost of US$297 851, acquisition and restructuring expenses of US$1,045 million," he said.

Kumwenda noted that Zimbabwe's sovereign risk was high and international investors were thus limiting their exposure to the country with the "hope that this would end in a few years to come".

"These factors present significant risk for the group going forward. The group will, however, be better placed to absorb such risks should they arise owing to a better-diversified revenue stream," he added.

Impending elections scheduled had seen some customers deferring capital expenditure to post-election period, thereby negatively impacting on the group's tractor and earth moving equipment business.

Low liquidity levels have also resulted in a number of customers delaying settlement of their accounts thereby inhibiting sales and restocking programmes.

At the group's annual general meeting last month, Zimplow said revenues for the first quarter were at the same levels as prior year.

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