Stellar tobacco to spur TSL

BUSINESS REPORTER

Listed agro-business concern TSL Limited is bullish that the expected increased output will spur the company’s performance shortly following huge demand for packaging material and increased tobacco handling.

It comes after the Tobacco Industry and Marketing Board projected national tobacco output to rise to 230m kilograms (kg) from 212m kg last year.

In a trading update for the quarter to January 31, 2023, TSL company secretary Fadzayi Pedzisayi said indications were that national tobacco volumes were expected to range between 5% and 10% above the prior year.

“The agribusinesses are expected to benefit from a larger tobacco crop in what is anticipated to be a good marketing season,” Pedzisayi said.

She said the Tobacco Sales Floor undertook extensive preparations for the tobacco marketing season.

“The business doubled the capacity of its decentralised floor in Mvurwi to cater for increased contracted volumes and augments the Harare, Karoi, and Marondera floors.

“Propak Hessian ramped up the supply and distribution of tobacco packaging materials resulting in volumes of both hessian wraps and tobacco paper being significantly ahead of the prior year due to the earlier start of the tobacco marketing season.

“The market has welcomed the locally produced tobacco paper and there has been a marked increase in volumes,” Pedzisayi said.

She said the business was adequately stocked for the season on all packaging materials.

Revenues for the group in the reviewed quarter grew by 106% driven by firmer volumes in the agri-inputs business, stronger performance in the logistics business, and increased uptake of tobacco packaging materials by customers.

The group’s handling volumes were significantly ahead of the prior year as the unit acquired the additional business from both existing and new customers.

Volumes in the International Services Division, for the quarter, were 46% ahead of last year due to the Maputo rail service and the commencement of additional rail service from Beira.

The introduction of reliable rail service is a positive move with a far-reaching impact on businesses in-country and within the region.

Volumes in the Supply Chain Division were depressed owing to global supply chain disruptions which constrained fertilizer movement.

FMCG distribution volumes were 9% behind the prior year, reflecting lower aggregate market demand.

Forklift hours in the Handling Equipment Division were 25% ahead of last year due to improved business from major clients.

The Division has introduced electric forklifts as part of its service offering which is expected to benefit customers in the food and beverages industry.

Avis Budget Group’s car rental days are marginally ahead of the prior year as international arrivals continue to improve.

Pedzisayi said performance in the real estate operation remained satisfactory.

“The business unit completed the expansion of the Mvurwi sales floor, bringing the new warehouse space to 9,000 square metres. This development has supported TSF’s decentralisation drive.

“The business is also creating an additional world-class warehousing capacity of 23,000 square metres on two of the group’s properties.  This move is intended to support the growth of both the agriculture and logistics operations over the next 12 to 18 months,” she said.

Despite good performance during the period under review, Pedzisayi said the first quarter of the financial year has seen the persistence of global supply chain disruptions and attendant increases in the cost of agricultural inputs.

She said power supply challenges have intensified and liquidity shortages in both local and foreign currency have become more pronounced.

The volatility in foreign currency exchange rates and inflation rates has not been as pronounced as in the previous quarter but remains high and greater use of the US$ as a trading currency has been witnessed.

TSL said interest rates on ZWL$ borrowings had become uneconomically high and consequently, the group repaid its ZWL borrowings during the quarter, resulting in a decline in the already low gearing of the group.

Looking into the future, Pedzisayi said the group will continue to strategically invest to solve several key challenges facing the economy in pursuit of the “moving agriculture” strategy.

The logistics business is expected to continue to scale up rail volumes across a broad spectrum of commodities from both Maputo and Beira ports and widen the customer base.