Zimplow accelerates stock liquidation

ROBIN PHIRI AND SAMANTHA MADE

Zimplow Holdings Limited, a publicly traded farming implements and earth-moving equipment supplier, is intensifying efforts to liquidate slow-moving, high-value spares and wholegoods stock at its Farmec and Trentyre Procurement Services (TPS) units as part of a broader strategy to optimise inventory levels and restore profitability.

The company’s CEO, Willem Swan, told shareholders at the Group’s Annual General Meeting that this move is part of ongoing measures to improve operational efficiency and financial performance.

“The Group continues to liquidate slow-moving, high-value spares and wholegoods stock at Farmec and TPS, whilst instituting model stock holding based on current and seasonal demand. Debt recovery initiatives will continue, and tighter control of debtors instituted. Cost containment continues through purposeful examination of all administrative costs and supplier evaluations,” Swan said.

Swan expressed cautious optimism that Zimplow will return to profitability in the second half of the year, buoyed by stabilising economic fundamentals, including the recent stability of the Zimbabwe Gold (ZIG) currency and improved foreign currency inflows from export operations.

“The Group expects the prevailing tight market liquidity conditions to ease in the second half of the year. Current ZIG stability and access to foreign currency from export proceeds by Mealie Brand bodes well for Group recovery. GDP is forecast to be between 5.2% and 6% as the country recovers from the 2023/24 drought, and off the back of foreign investment in the mining sector. Overall, management is quite confident that the Group will continue to climb back to positivity in the second half of the year,” he said.

Zimplow, which operates units including Farmec, Mealie Brand, Powermec, TrenTyre, Scanlink, and TPS, has embarked on aggressive cost-cutting measures and supply chain re-evaluations to enhance competitiveness.

“The effects of the El Niño drought will still be felt during 2025 in the agricultural sector, and tight liquidity is expected to persist. The impact of the informal market will continue to be felt by TrenTyre and CT Bolts, but measures to be more price competitive, offer the best-in-class service, and lower overheads are expected to translate to profitability,” Swan added.

However, Swan cautioned that external challenges could weigh on the Group’s recovery efforts, particularly the delayed infrastructure and mining projects caused by erratic rainfall patterns and persistent electricity outages.

“Late rains in the 2024/25 season have delayed infrastructure and mining projects, and coupled with persistent power outages, the cost of doing business will impact the entire market,” he said.

Weaker commodity prices, especially in the platinum and chrome sectors, have also dented growth prospects, delaying key projects in the mining equipment supply chain. According to Swan, dominance by Chinese mining operations further complicates market dynamics.

“Softer platinum and chrome prices have delayed several large projects. Chinese mines, which currently make up approximately 80% of all mines, generally buy exclusively from Chinese suppliers, reducing the rest of the mining equipment suppliers to 20% of the market, which leads to further pressure on margins,” he explained.

Despite these challenges, Swan remains optimistic that internal restructuring at key business units such as Mealie Brand and TrenTyre will bolster Group profitability. He also highlighted encouraging sales pipelines across other strategic units.

“Rationalisation at Mealie Brand and TrenTyre is expected to bring these business units back to profitability, thereby adding to Group profitability. Sales pipelines across Scanlink, Farmec, Powermec, and TPS are encouraging,” Swan said.

Zimplow is banking on these strategic interventions and anticipated macroeconomic improvements to navigate through the current headwinds and regain its footing in the second half of the year.

The Group’s latest financial performance reflects some early progress in these efforts. Zimplow recorded a 10% increase in revenue to US$12,07 million in the first five months of the year, signalling improved business activity as the Group reorganises its business model.

“The group recorded revenue for the year to date of US$12,07 million, a 10% increase compared to the same period in 2024 (US$10,99 million). Gross profit was 2% below the previous year to date,” Swan said.

During the period, local implement volumes grew by 47%, while local spares volumes increased by 80% compared to the previous year-to-date period.

For Farmec, under its agriculture division, Swan said year-to-date (YTD) revenue was 16% higher than the previous year, with tractor sales reaching 61 units, exceeding the previous year by 30 units.

“Strong performance has been seen in Q2 with expectations of an even better Q3, leveraging on tobacco auction sales and confirmed orders. At Mealie Brand, YTD revenue was 42% above the previous year to date,” Swan said.

Mealie Brand is also under Zimplow’s agriculture division.

“Local sales exceeded budget by 42%, while exports volumes of equipment grew by 110% over the previous year to date,” Swan said. “The group expects export orders to increase in the second half of 2025, but the influx of cheaper Indian and Chinese products into Zambia will temper export volumes to below those achieved in 2023.”

Meanwhile, under its Powermec subsidiary, revenue was 11% above the previous year, as Genset sales totalled 33 units, 38% higher than the previous YTD.

Service hours increased by 53% over the previous year and were 19% ahead of budget, while parts sales improved, being 16% ahead compared to the previous YTD. Swan said efforts to secure new customers in the mining and agriculture sectors were a priority, and efforts to improve stock availability were ongoing.

He added that the current power deficit and move towards alternative energy sources would work in the business unit’s favour.

“On Trentyre (automotive subsidiary), revenue was 35% below the previous year. Retread volumes increased by 8% compared to last year. Operating expenses were 27% below the previous year and 2% below budget year-to-date,” Swan said.

“Turnaround efforts are underway, with a focus on improving profitability, an effective stock replacement regime, and reducing debt exposure.”

Zimplow remains cautiously optimistic that its ongoing turnaround strategy, supported by targeted interventions at underperforming units and improved economic conditions, will yield results in the second half of the year.