Zimplow implements cost-cutting measures amid economic uncertainty

CLOUDINE MATOLA

Zimplow Holdings Limited, an agro-industrial concern listed on the Victoria Falls Stock Exchange, has undertaken a series of cost-cutting measures—including staff reductions, branch closures, and operational consolidations—to safeguard cash flow amid Zimbabwe’s deteriorating economic conditions, Business Times can report.

The challenging economic environment has compelled many companies to adopt aggressive cost-containment strategies to ensure sustainability.

A growing number of businesses have also been forced into the informal sector due to these economic hardships.

In its financial results for the  12 months to December 31, 2024, Zimplow chairman Benjamin Kumalo stated that the company has implemented these measures to protect shareholder value during this period of uncertainty.

“We embarked on a cost-containment drive to preserve cash flows, which included a group-wide staff rationalisation exercise, closure of underperforming branches, and branch consolidation at TrenTyre. This was further reinforced by a review of the Group’s organisational structure, leading to the disbanding of the cluster approach in favor of a decentralised model. This restructuring aims to enhance operational efficiency, streamline processes, and create a leaner organisational structure,” Kumalo said.

Zimplow’s Group Chief Executive Officer, Willem Swan, highlighted additional measures taken to maintain competitiveness, including renegotiating supplier prices and securing new suppliers for high-demand stock items.

“The Group has vigorously pursued cost-cutting initiatives, re-evaluated supplier pricing, and actively sourced new suppliers for fast-moving stock items to remain competitive in the market,” Swan stated.

Furthermore, Kumalo revealed that the company identified and disposed of non-strategic assets worth US$2.7m to strengthen working capital.

Additionally, due to subdued market demand, operations at Mealie Brand were placed under care and maintenance.

“As part of our strategic focus, we reviewed the production costs of key products manufactured at the Mealie Brand factory, with the goal of passing cost savings onto customers to improve competitiveness. Moreover, management is committed to broadening the product range by fully utilising new equipment acquired to enhance factory capacity. This diversification effort is targeted at servicing the growing mining and infrastructure sectors. Given the persistently weak market demand, Mealie Brand operations were placed under care and maintenance until conditions improve,” Kumalo noted.

He further disclosed that the disposal of non-core assets—comprising residential and commercial properties valued at US$2.753m—was a deliberate effort to bolster working capital and consolidate the company’s position in the mining and infrastructure sectors, particularly following the successful conclusion of the Barzem transaction.

As a result, Tractive Power Solutions (TPS) saw a remarkable 478% growth in revenue and a 63% improvement in financial performance.

“The unsold properties earmarked for disposal have been classified as ‘Assets Held for Sale’ in accordance with International Financial Reporting Standards (IFRS). Meanwhile, the Group has prioritised balance sheet preservation through a comprehensive working capital management review. Given the prevailing tight liquidity conditions, we have placed emphasis on self-financing by optimising the cash cycle, enhancing inventory management, and refining the supply chain,” Khumalo added.

Despite these strategic initiatives, Zimplow’s revenue for the year under review declined by 7.2% to US$29.778m, down from US$32.072m recorded in 2023.

Additionally, the company reported a net loss of US$2.161m, reversing a profit of US$559,871 in the previous comparative period.

This was attributed to multiple macroeconomic challenges, including the devastating impact of an El Niño-induced drought, the introduction and subsequent devaluation of the Zimbabwe Gold (ZWG) currency in September 2024, and prevailing liquidity constraints.