- The Company expects to increase its footprint in Mozambique, Botswana and Zambia markets
- The Company realised a profit after tax of ZW$4.8 billion from a loss of ZW$4.7 billion
- Lumber sales volumes were 43 120m3 against 49 047m3 achieved in 2021 on the back of lower aggregate demand primarily in the local market
Harare- Zimbabwe Stock Exchange-(ZSE) listed forestry products outfit, Border Timbers Zimbabwe Limited has shifted its growth focus to the regional markets and beyond after productivity flopped in the local market.
The Group, which successfully exited the Judicial Management in March 2022 reviewed interests and optimism within the regional markets of Zambia, Botswana and Mozambique in particular while paying more attention to the international markets with special reference to European ones.
In the full year to 2021, the Group highlighted its interest in the European markets after securing the Forest Steward Council (FSC) Certification for Imbeza Estate, an initiative that ensures the best forestry management practices under FSC, which gives the company access to European markets that demand FSC-certified products.
During the full year ended 30 June 2022, the Group said it will expand its market base in both regional and international markets as it gears up its recapitalisation initiative in a post-Judicial-Management fiscal year since 2016, igniting hope to sustain the current recovery from prior year losses.
“Improved performance is anticipated in the Poles business due to increased demand for the product in the SADC region where rural electrification projects and infrastructure developmental projects are attracting financial support,” the Group’s chairperson Elias Hwenga said in a statement accompanying the full year financials.
“We forecast Poles sales performance to be bolstered by the Mozambique, Botswana, Zambia…”
The export markets, particularly in Botswana and Zambia have become lucrative for the Group due to currency stability enjoyed under the new leadership of Haikande Hicchilema which also turned around economic stability. With its vast copper resources, all round electrification has gained momentum under Hichilema, an opportunity the Group seeks to exploit while sustained currency and economic stability in Botswana is a pull factor with returns. As of lately, Mozambique has joined the modernisation rush, boosted with vast gas and electricity export market.
However, the Group is set to start a new fiscal year in a tumulus environment, with the headwinds that propped the Judicial Management notion still in play: economic instability due to retrogressive fiscal policies, erratic power supply, impact of climate change on rainfall seasons and the Group’s poor mechanisms in managing forest fires.
Fiscal indiscipline, that has plunged the economy into tatters during the Judicial Management era is set to spike as 2023 harmonised elections near while government’s failure to provide enough electricity continues climbing the mountain. Zimbabwe is set to sustain failed records in meeting targets, latest being 2023 electricity self-sufficiency drive and fiscal discipline towards elections.
Wild fires continue also to threaten productivity at local stage. Plantation fire damage remains the major business risk, particularly arson. During the year, the Group lost 235 hectares from 27 hectares in full-year 2021, which was a significant loss. compared to the previous period.
“As a result, the Company has further strengthened its plantation patrol teams, community engagement programs and acquired new firefighting equipment,” Hwenga added.
However, besides arson, the impact of climate change on forest life is a major drawback the Group should be prepared to take care of. Natural rain seasons have been disturbed due to climate change, accelerating global temperatures which are key in sparking forest fires. The situation will continue being exacerbated by the Russia-Ukraine war which has caused energy crisis forcing many member states to resort to coal. The effect of forest fires is not likely to end sooner and major preparations are key.
“The Company is fully mindful of the impact of climate change on the planet and is adapting and conducting its operations in a way that is environmentally friendly.”
Currency stability and electricity supply remains detrimental factors in the economic prowess in Zimbabwe and hugely depending on the government to provide some bailouts will be a huge miscalculation. A good example is RioZim which has sustained decline in productivity due to its reliance on ZESA and Auction Market, institutions that are underfed to perform their duties.
The Group said harvesting operations performed very well with the plant optimisation broadly on plan. The outsourcing strategy on harvesting continued to stabilise the sawmills log supply which resulted in high plant capacity utilisation.
“All logs supplied to the processing plants were from the Company’s own plantations with no external logs purchased.”
The graph below shows lumber production vs sales in cm3, 2021 and 2022 period
Lumber production volume was 43 930m3 from 45 871m3 in 2021, 4% lower driven by low customer demand during the period under review.
Lumber sales volumes were 43 120m3 against 49 047m3 achieved in 2021on the back of lower aggregate demand primarily in the local market. During the period, the Zimbabwe dollar succumbed to inflationary pressures due to fiscal indiscipline which fuelled the parallel market activities.
As a bail out, the Group is igniting efforts to expand the export market base with particular focus on Zambia, Mozambique, and Botswana. During the period under review, 713 hectares were planted, a significant uptick from 341 hectares planted in full-year 2021.
The Group reviewed it is focusing more on improving the Biological Asset, applying best practices, and improving planting methods while continuing to benefit from outsourced Silviculture operations which brought about a more cohesive and efficient plantation management process.
“With Imbeza Estate already certified, we are moving forward to having Sheba, Charter, and Tilbury Estates FSC certified by the end of 2023,” Hwenga added.
Treated Poles sales volume was 10 169m3 a 7.4% uptick from 9 464m³’s 2021 performance. The Group reiterated the significance of market development as the key focus of its Poles business as it is actively pursuing new opportunities in the local market as well as in the region and beyond.
The Group realised a profit after tax of ZW$4.8 billion from a loss of ZW$4.7 billion in the prior year. Profit after tax was buoyed by improved revenue, monetary gains and reduced financial costs during the period.
The graph below shows group’s financial performance in 2022 in ZW$ billions
Inflation adjusted revenue for the period accelerated by 11% to ZW$4.8billion from ZW$4.32 billion primarily driven by consistent product quality of our Kiln Dried Timber resulting in better average selling prices.
However, operating expenses were 85% higher as compared to the previous period mainly driven by inflationary pressures while cash and cash equivalents at the end of the period amounted to ZW$66 million from ZW$83 million in 2021.
“Recapitalisation remains a key priority with our replanting program already on course to reduce the unplanted area to industry standard of 5% in the next three years while the Company is in the process of recapitalising its two Sawmills with the latest milling technology and commissioning of the new machinery is expected by the end of FY2023.”