eBusiness Weekly
Tawanda Musarurwa
Analysts say listed diversified group Zimplow will continue benefiting from leveraging on the critical economic sectors of agriculture, infrastructure and mining.
Analysts at Akribos Research Services estimate that Zimplow is presently trading at an “undemanding” FY2018 PER of 8.8x and a PBV of 0.66x, giving it a ‘buy’ recommendation.
“The company’s major business is in farming, mining and infrastructural sectors, all of which are poised for significant growth. The mining sector has also seen foreign investors showing interest and committing to large scale projects in chrome and platinum.
“On the other hand, the agricultural sector is set to benefit from the Command Agriculture which will continue to stimulate demand for Zimplow’s products. All in all, the company’s outlook is good and is likely to improve exponentially with an economic upswing,” says the analysts.
For its half-year results to 30 June, 2018 the group posted overall profit after tax of $1,61 million, a 511,12 percent jump from $0,26 million in the prior comparable period.
The group’s total revenue for the period rose 38 percent to $20,3 million from $14, 7 million in the prior comparable period.
“The major contributors in revenue were the farming, mining and infrastructural segments of the company’s operations which accounted for 99 percent of total revenue,” noted Akribos.
“The first half of the year has been characterised by increasing demand for the group’s products owing to positive sentiment and real growth in the underlying economy. Our business segments are well-contoured to the growth sectors of the Zimbabwean economy and as a result we expect to meet budgets and perform ahead of last year,” said Zimplow in statement accompanying its half year results.
The flagship mealie brand unit saw its revenue for declining 22 percent to $3,4 million from $4,3 million as a result of the absence of the Angolan exporter order which is expected in the last half of the year. Profitability for Mealie Brand of $843 000 was flat on last year.
At farmec revenues doubled to $7,7 million from $3,8 million in the first half of 2017. Tractors sold went up from 44 units to 95 units. In terms of profitability the unit swung from a loss-making position in the prior year to a profit before tax of $947 000.
The CT bolts unit’s revenue rose 54 percent to $863 000 from $560 000 and profit improved from $18 000 to $309 000. The unit continues to perform well in its market segment and is well stocked and positioned to perform ahead of budget.
Barzem subsidiary turned in $7,1 million in revenue from $4,8 million on the back of parts and services. The unit swung from a loss in 2017 to profitability for first half 2018.
The group’s gross profit was up 61,8 percent to $7, 16 million from $4,43 million, giving a gross profit margin of 35,27 percent compared to 30, 11 percent in the prior comparable period.
The rise in gross profit was notwithstanding an increase in cost of sales of 27, 89 percent.
