Pricing woes hit TSL
…. as complex monetary policies squeeze profits

LIVINGSTONE MARUFU
TSL Limited, a publicly traded agribusiness firm, saw a significant decline in its bottom line for the full year to October 31, 2024, as complex monetary policies forced the company to trade in local currency despite procuring raw materials in foreign currency.
This challenge is not unique to TSL. Many companies in Zimbabwe are struggling under similar conditions, having to operate with a fixed exchange rate while suppliers demand payments exclusively in US dollars. This mismatch has resulted in severe exchange losses, making it increasingly difficult for businesses to remain viable.
In a statement accompanying the company’s 2024 financial results, TSL chairman Anthony Mandiwanza highlighted the tough economic climate, marked by inflationary pressures, liquidity challenges, and power shortages.
“Agricultural trading businesses, like many others, faced the dilemma of pricing in ZIG while sourcing products in US dollars. The group’s profitability was negatively impacted by the dollarisation of most operating expenses, exacerbated by rising US dollar inflation,” Mandiwanza said.
Profit before tax from continuing operations fell to US$7.1 million, down from US$9.8 million in the previous year. Despite this decline, he assured stakeholders that TSL’s financial position remains strong and continues to grow.
The first half of the financial year saw significant policy shifts as authorities attempted to manage economic challenges. Frequent power outages added to the cost of doing business, with companies forced to rely on expensive alternative power sources. Connectivity and data costs also surged, further straining operations.
Despite these hurdles, TSL’s revenue from continuing operations reached US$36.9 million, a 1% increase from the previous year. Most business units met their volume targets, except for Agricura.
“The group’s EBITDA dropped by 5% from the prior year due to the conversion to US dollars. Additionally, we revised our depreciation model to reflect asset revaluations, which caused a decline in interest cover from 23 times to just 5 times. Headline earnings per share also fell from US$2.48 cents to US$0.69 cents. Adjustments have already been made in the 2025 financial year to address the dollarisation of operating expenses,” Mandiwanza explained.
Despite these setbacks, the company’s gearing levels remain within acceptable limits, with plans to reduce debt using internal cash flows.
Tobacco remains a core business for TSL, with Tobacco Sales Floor (TSF) maintaining its status as Zimbabwe’s largest auction floor and one of the leading tobacco handlers.
The 2023/24 national tobacco season closed with 231.7 million kilograms sold, a 22% decline from the previous year’s 296 million kilograms. However, the national average price improved, rising to US$3.43 per kg from US$3.03 per kg.
“Despite the 22% drop in the national crop, TSF successfully maintained its tobacco handling volume at 52 million kilograms. The company strengthened its relationships with merchant customers, handling 44 million kilograms of contract tobacco, a 13% increase from the previous season,” Mandiwanza noted.
To improve service delivery, TSL expanded and upgraded its decentralized floors in Karoi, Mvurwi, and Marondera, making transactions more convenient for both merchants and farmers.
Meanwhile, Propak Paper volumes surged by 52%, giving the company a 70% market share in the national tobacco paper segment. However, tobacco hessian volumes declined by 16%, in line with the overall drop in national tobacco production.
TSL is now working to increase regional exports of tobacco paper and hessian to offset local market declines.
Following a poor 2023/24 summer cropping season, TSL decided to exit two non-core businesses to focus on more strategically aligned operations.
“The group ceased all farming operations immediately after the winter wheat harvest in October 2024, following the expiration of its farming joint venture on July 28, 2024. As a result, our farming unit has been treated as a discontinued operation under international financial reporting standards,” Mandiwanza explained.
In a move aimed at preserving financial flexibility, TSL’s board decided to forgo a dividend for the financial year ended October 31, 2024. This decision was influenced by the company’s impending acquisition of a 51.43% stake in Nampak Zimbabwe Limited from Nampak Southern Africa Holdings Limited.
Looking ahead, TSL is positioned to capitalize on emerging opportunities as part of its long-term growth strategy. The company is prioritizing balance sheet restructuring to preserve value and ensure financial sustainability in an increasingly dollarised operating environment.