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TSL targets forex generation to stay afloat

BY TAFADZWA MHLANGA

Zimbabwe Stock Exchange-listed TSL Limited will focus on foreign currency generation and regional expansion this year at a time the country is facing mounting economic problems, a top executive has said.

James Muchando, the TSL company secretary, said the group maintained minimal foreign currency exposures and used part of its income to purchase trading invertors with longer expiry dates to hedge against inflation.

“Foreign currency generation remains a key priority across the group and all business units are strategically exploring regional expansion,” Muchando said in a trading update.

“Several initiatives are at various stages of execution to create and preserve value whilst defending capital.

“The group maintained the minimal foreign currency exposures and its gearing remains low at 3% from 13% in the prior year.

“Part of the income generated was used in the procurement of trading invertors with longer expiry periods, both as an inflation hedge and in preparation of the upcoming season.”

He said the poor operating environment was being worsened by the drought, which is now in its second year.

“Rising inflation eroded disposable incomes and reduced consumer spending power,” Muchando added.

“Access to foreign currency remained problematic and shortage of fuel and electricity became more pronounced and impacted on business to varying degrees.

“The country experienced one of the worst droughts over two decades, leaving large segments of the population food-insecure.”

Zimbabwe has been experiencing serious foreign currency shortages for several years, but the crisis deepened last year when the government abandoned the multicurrency regime.

A number of companies are now adopting aggressive foreign currency generation strategies to remain afloat.

Meanwhile, TSL saw its revenues grow to $454 million last year from $281 million recorded in 2018.

TSL’s profit after tax increased by 78% to $124 million during the period under review.

In a segment breakdown, TSL’s Avis vehicle rental service recorded a 5% reduction in rental days due to fuel shortages.

Volumes in the general cargo business were 24% down due to non-movement of fertiliser stocks that had been imported by clients in anticipation of a reasonable farming season.

Average tobacco prices were approximately 30% down compared to the previous year. The prices were down to an average of US$2,03/kg from US$2,92/kg in 2018.  
Despite the challenges, the Tobacco Sales Floor volumes hit a new high of 260 million kg for the year ended October 31, 2019.

“Tobacco Sales Floor invested in upgrading its handling facilities, re-engineering the business processes to eliminate queues and secured on additional volumes from merchants.

“The improved merchants’ volume coupled with the higher national tobacco crop size resulted in a good overall performance,” Muchando said.

“Propak Hessian signed on new customers to increase its market share by 4% and benefited from the larger national tobacco crop.

“Support was received from our tobacco merchant partners to import inventories.”

The logistic business recorded a growth in the tobacco handling business, which was up by 27%, and the inland ports operations were also 24% up as a result of new clients that were signed by Propak Hessian.

Premier Folk Lifts recorded a 26% volume increase due to the larger national tobacco crop.

TSL’s business is focused on mainly logistics, the supply of inputs to agriculture, tobacco growing, wrapping and auctioning, printing and packaging and car rental services.

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