eBusiness Weekly
Enacy Mapakame
Zimplow Holdings Limited has bemoaned delays in foreign payments through the auction system that had a knock-on effect on its earth moving equipment business — Barzem — as parts and equipment orders were delayed or cancelled during the half-year period to June 30, 2022.
During the period, Zimplow also announced Barzem’s exit from the CAT dealership.
The period under review was generally tough, not only for Zimplow, but across sectors, for instance the geo-political conflict in Eastern Europe as well as the aftermaths of Covid-19 pandemic among the various factors.
Zimplow group chairman, Godfrey Manhambara, said such challenges have brought about increases in supply lead times and costs of equipment as well as various inputs required in agriculture, mining, constructions and automotive sectors.
“Macro-economically, the delay in remittance of foreign currency awarded on the RBZ auction market further increased the lead times and therefore working capital cycles that had been substantially affected by the Covid-19 pandemic. In addition, the interest rate spike that followed discouraged bank borrowings which the Group has traditionally leveraged on to address the increased appetite for cash given the long working capital cycle,” he said.
The second quarter then began with a notice of termination of the CAT distributorship which came to effect on October 1, 2022.
“The business unit has, therefore, been seized with value preservation actions in preparation for Zimplow to transition to a new supplier of earth moving equipment albeit under a new corporate identity,” said Manhambara.
Barzem business was established over 70 years ago as the local Caterpillar dealer. Early this year, Zimplow announced Barzem will exit the Caterpillar distributorship on September 30, 2022 on the back of the changes in the strategic direction by both the supplier and the group.
The group indicated that while this exit would have an impact on the overall revenue performance initially, management believe that the risk management protocols that have been put in place by the board and management will ensure that the group preserves value and shareholder returns.
Additionally, the company was working on enhancing capacity at its factories to meet demand and ensure the market gets services across sectors and value chains. While the CAT brand was mostly a high end brand, indications are that the group will engage a premium brand that caters for all market segments.
During the full year to December, 30, 2021, volumes of earth moving equipment sales grew by 84 percent against prior year performance. On the other hand, the focus on production by major mining houses who use CAT surface mining and handling equipment resulted in increased fleet maintenance. Consequently, parts sales grew by 75 percent and hours sold by 65 percent against prior year performance. Revenue, therefore, grew by 102 while operating profit was 109 percent ahead of prior year performance.
