ZIMPLOW: 2009 analyst briefing

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Zimplow Limited analyst briefing - September 2009

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ZIMPLOW: 2009 analyst briefing

  1. 1. ANALYST BRIEFING ROYAL HARARE GOLF CLUB 16 SEPTEMBER 2009
  2. 2. CELEBRATING 70 YEARS
  3. 3. INTRODUCTION WELCOME to our first Analyst Briefing since September 2008 The team today comprises of:- Zondi Kumwenda Brendan Mitchell Gordon Westland The team should be able to answer to good questions!!
  4. 4. BACKGROUND The group now comprises of 3 divisions: Mealie Brand, CT Bolts and Tassburg 1. Mealie Brand is the largest of the three divisions and is involved in the manufacture and export of ox- drawn implements and hoes. The factory is based is Bulawayo. 2. CT Bolts is a distributor of mild steel bolts and nuts, nails and a wide range of other fasteners. The division also manufacturers specialised fasteners at its Bulawayo factory.
  5. 5. Background- cont 3. Tassburg is a manufacturer of Wood screws, Veranda bolts and High tensile bolts effectively became a division of the group on 19 December 2008 after fulfilling the regulatory requirements. The factory is based in Harare. 4. The 3 divisions employ about 500 employees amongst themselves.
  6. 6. MISSION “To avail quality affordable and reliable steel products on time every time to the mining, farming, construction and manufacturing sectors” VISION “To have a local presence in all African countries south of the Sahara by 2020 (36 by 2020)”
  7. 7. VALUES Integrity - Being absolutely truthful and accepting responsibility for our actions Quality - Being professional and quality oriented in everything we do. Teamwork - Working together to achieve the common goal. Dependability - Our customers, employees and suppliers must be able to count on us. Fun- Embracing a positive attitude and spontaneity.
  8. 8. CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2009 US$ TURNOVER 2,018,539 Domestic 1,244,467 Export 774,072 PROFIT BEFORE INTEREST AND TAXATION 303,752 Finance income 884 Finance costs (20,980) Net finance costs (20,096) PROFIT BEFORE TAXATION 283,656 Taxation (135,707) PROFIT AFTER TAXATION 147,949 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 147,949 Profit attributable to: Owners of the parent entity 147,949 Total comprehensive income attributable to: Owners of the parent entity 147,949 Basic earnings per share (US cents) 0.05
  9. 9. CONDENSED STATEMENT OF FINANCIAL POSITION AT 30 JU US$ ASSETS Non current assets Property, plant and equipment 2,529,146 Current assets 5,657,362 Inventories 4,092,456 Trade and other receivables 975,162 Financial assets classified as "at fair value through profit 123,051 Cash and cash equivalents 466,693 TOTAL ASSETS 8,186,508 EQUITY AND LIABILITIES Shareholders' funds 6,891,941 Non current liabilities Deferred tax 842,146 Current liabilities Trade and other payables 452,421 TOTAL EQUITY AND LIABILITIES 8,186,508
  10. 10. CONDENSED STATEMENT OF CASHFLOWS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2009 US$ CASH FLOWS FROM OPERATING ACTIVITIES Net operating income before interest and taxation 303,752 Non cash items : Depreciation of property, plant and equipment 108,289 Fair value adjustment of financial assets classified as "at fair value th (63,833) Operating income before working capital changes 348,208 Working capital changes 40,543 Cash generated from operations 388,751 Taxation paid (11,174) Net finance costs (20,096) Net cash generated from operating activities 357,481 CASH FLOWS FROM INVESTING ACTIVITIES Acqusition of plant and equipment (52,407) Net cash utilised in investing activities (52,407) Increase in cash & cash equivalents 305,074 CASH AND CASH EQUIVALENTS AT 1 JANUARY 2009 161,619 CASH AND CASH EQUIVALENTS AT 30 JUNE 2009 466,693
  11. 11. S IN EQUITY FOR THE SIX MONTH PERIOD Functional Total equity Share Share currency Retained (shareholder capital premium change and earnings s' funds) US$ US$ US$ US$ US$ - - 6,743,992 - 6,743,992 - - - 147,949 147,949 - - 6,743,992 147,949 6,891,941
  12. 12. OPERATIONS a) TURNOVER • We have divided the analysis into 2 categories . One reflecting the current six months period and another showing the full 12 months to June 2009. • 6 months implements units are overall down by 62% from prior year with both exports and local units dropping by almost a similar percentage. • Spares were however, up by 41% indicating the disposable income pattern. • A full year analysis however reflects a decrease of 38% on implements volumes. Exports are still second highest compared to last 7 years. • Local units down by 73% • Export units down by 9%.
  13. 13. OPERATIONS b) ANALYSIS BY COUNTRY Zimbabwe • The market is showing signs of recovery • Tobacco and cotton proceeds boosted the sales • Outlook looks promising Zambia • It suffered heavily from copper price volatility • Metal prices now recovering • Current orders points to a better season
  14. 14. OPERATIONS b) ANALYSIS BY COUNTRY – cont Angola • Affected by a slump in oil prices • Government has shifted resources to stadium construction for CAF Championships • Orders should come through in February • Currently working on an order of USD 250 000 South Africa • Market still there but margins are not keen
  15. 15. OPERATIONS b) ANALYSIS BY COUNTRY – cont Namibia • Feeds off Angola orders • Very slow off take this year. Should pick up as season progresses oil prices East Africa • Competition from China and prolonged drought in Kenya • Margins are very thin
  16. 16. OPERATIONS c) COST DRIVERS • The whole group has steel as its biggest cost driver • The Steel industry reacts sharply to global events • It suffered from both the “oil shocks” of last year and the global financial crisis. • The business reviewed costs and prices to reflect net realizable amounts • These may have taken around USD 500 thousand off the opening balances • Prices were adjusted accordingly • Steel prices are now on the ascendancy • “Steel is not sold its bought” • We have challenges with certain key sections • Labour is currently stable
  17. 17. TURNOVER Jan-June Jan–June % CHANGE 2009 2008 IMPLEMENTS LOCAL (units) 7018 17 559 (60%) EXPORT (units) 7171 19 763 (64%) TOTAL 14 189 37 322 (62%) HOES (units) 4,400 24,151 (82%) SPARES (units) 96,464 68,626 41%
  18. 18. Summary Sales 40,000 38,000 36,000 34,000 32,000 30,000 28,000 26,000 Jun-08 Units Im plem ents 24,000 Jun-09 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - January February March April May June Month
  19. 19. TURNOVER July 2008- July 2007- % June 2009 June 2008 CHANGE IMPLEMENTS LOCAL (units) 11 194 41 630 (73%) EXPORT (units) 45 549 49 980 (9%) TOTAL 56 743 91 610 (38%) HOES (units) 22,098 73,502 (70%) SPARES (units) 283,425 498,770 (43%)
  20. 20. MEALIE BRAND IMPLEMENTS TURNOVER 100,000 90,000 80,000 70,000 Local export 60,000 Units Implements T otal 50,000 40,000 30,000 20,000 10,000 0 2003 2004 2005 2006 2007 2008 2009 YEAR
  21. 21. Summary Sales 92,000 88,000 84,000 80,000 76,000 72,000 68,000 64,000 Jun-06 60,000 Jun-07 56,000 Jun-08 Units Implements 52,000 Jun-09 48,000 44,000 40,000 36,000 32,000 28,000 24,000 20,000 16,000 12,000 8,000 4,000 - July August September October November December January February March April May June Month
  22. 22. DIVISONAL PERFORMANCE CT BOLTS- OVERVIEW It is still a measure of economic activities Showing signs of recovery No longer drip feeding the customers Daily average sales increased from as little as US$2424 to US$4386 in August indicating that the economy is reviving itself. Started extending credit to key customers Bright prospects in the mining sector provided ownership wrangles are resolved “Starting to walk before we can run”
  23. 23. DIVISONAL PERFORMANCE CT BOLTS- YEARLY 2009 2008 % Change MILD STEEL BOLTS 17 573 47 743 (63%) (KGS) NAILS (KG) 6 543 23 663 (72%) TOTAL KGS 24 116 71 406 (66%) MILD STEEL (UNITS) 479 090 1 351 837 (64%) HT BOLTS 220 662 349 443 (37%) SCREWS 1 680 873 4 795 456 (65%) MISCELLANEOUS 438 696 838 581 (48%) FACTORY STOCK 322 105 608 496 (47%) TOTAL UNITS 3 141 426 7 943 814 (60%)
  24. 24. DIVISONAL PERFORMANCE CT BOLTS- 6 MONTHS Jan - June Jan – June % Change 2009 2008 MILD STEEL BOLTS 8 710 10 684 (18%) (KGS) NAILS (KG) 4 098 16 272 (75%) TOTAL KGS 12 808 26 956 MILD STEEL (UNITS) 369 653 526 780 (30%) HT BOLTS 173 959 180 706 (4%) SCREWS 1 398 451 1 672 537 (16%) MISCELLANEOUS 299 408 294 203 2% FACTORY STOCK 174 281 180 468 3% TOTAL UNITS 2 415 749 2 854 694 (15%)
  25. 25. DIVISONAL PERFORMANCE TASSBURG Screw plant still running below 20% capacity Bolt plant will be reviewed as the cost of running the plant are quite prohibitive Efforts being made to recapture the local market share, loss to imports Gradual growth in volume sales Small consignment to be exported to RSA soon Like CT Bolts, credit is now being offered to customers Likely to benefit from a possible resurgency in the economy
  26. 26. TRADING UPDATE The group operated profitably for the months of July and August Turnover for the 2 months was 35% ahead of the entire turnover for the 6 months period to June 2009 Mealie Brand division was particularly impressive The group dropped down an After Tax Profit of around 20% CT Bolts daily average sales reflects an Increasing trend. Like steel, fasteners are a barometer of the economy Tassburg is still trying to find its feet and regain some of the lost market share.
  27. 27. TRADING UPDATE-cont September is looking good again and depending on the rains, October might even be better. The agricultural input scheme, although not directly benefiting Zimplow, will certainly have some spinoff for the Agricultural division. The possible rebound of the mining sector should be a good “Omen” for CT Bolts. Possible rationalisation of the “HT” business at Tassburg Doing business in Zimbabwe has never been that interesting and simpler than before. Overall, the business environment is looking bright and we are ready for another possible take off.
  28. 28. Credit Risk Liquidity constraints in the economy Local cost structures

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