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Buoyant Zimplow looks for possible acquisitions

Chris Muronzi

ZIMPLOW Ltd is looking at possible acquisitions this year buoyed by the company’s financial position that management feels supports a buy, CEO Zondi Kumwenda says.

Kumwenda said Zimplow was looking at acquisitions in local and regional markets to grow the business but would confine focus on businesses that add synergies to the group’s core business.

“The company’s financial position is supportive of strategic acquisitions and these will be pursued by the board in 2011. We are looking at any synergies that would add value. It will be either local or regional acquisitions,” said Kumwenda on the sidelines of an analysts briefing in the capital recently.

Zimplow made an after tax profit of US$2,3 million in the full year to December from a revenue of US$12 million. The company declared a thrice covered dividend of  US$700 000.

“It is pleasing to note that all operating divisions generated positive cash from operations. Total net cash increase for the year was US$1,9 million,” said the company. The company had a net cash position of US$3 million in the period under review.

Zimplow Ltd is the largest manufacturer and distributor of farming implements in sub-Saharan Africa and operates through three divisions — Mealie Brand, CT Bolts and Tassburg.

The company also manufactures and distributes metal fasteners for the mining, construction and agricultural industries.

Management sees a better second quarter and turnover rising 10% in its full year to December this year, Kumwenda said.

He says although margins decreased in its full year to December last year, stronger volumes compensated.

Kumwenda said:“We have gone back to the traditional way of doing business where volumes are high but margins are low. We anticipate a modest turnover growth of about 10% or above in 2011.”

Zimplow says it hopes to grow its exports to East Africa, particularly, Tanzania and South of Sudan.

Zambia is currently Zimplow’s largest export market accounting for about 40% of the group’s exports, he said.

But management said costs would rise this year on the back of rising steel prices.Steel prices went up 28% this year and will continue on an upward trend into the second quarter.

“Substantial price increases in steel and coal coupled with the depreciation of the United States Dollar and increase in labour costs have mitigated against the ability of the company to maintain the margins achieved in 2009,” said the company in a statement attached to its results. “As reported in our interim results, margins are aligning themselves to international levels. The company managed to compensate decreasing margins with stronger volumes.”

Volumes in the company’s Mealie Brand division grew 16% over last year.

Management said the achievement was commendable given that the subsidiary was starting from a higher base achieved in 2009.

Local volumes were up 14% while exports increased by 18%. The proportion of implements exported was 50,3%. Volume throughput increased by 16% to 3 263 tonnes this year, the company said.

Its bolts and screw manufacturing unit — C.T. Bolts — saw key volumes increasing by 108% from the prior year while Tassburg volumes were 128% up from last year.

Group revenue grew to US$12,3 million up 36% from last year.

Domestic revenue increased by 53% while exports increased 6,8% compared to last year. Domestic revenue was US$8,6 million while exports stood at US$3,6 million.

All divisions recorded increases in revenue, management said. C.T. Bolts and Mealie Brand saw improved profitability while Tassburg recorded a loss mainly owing to stock write downs of US$91 489.

Management said costs and margins were largely realigned and saw room to grow the company’s profits going forward.

“There remains room to improve profitability within the Company. We expect growth in revenue in 2011 on the back of improved market share for both the fastener and agricultural divisions. It would appear that the region will experience normal to above normal rainfall and this should provide the company with good export volumes.”

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