• TSL Limited expanded tobacco paper exports to Zambia, with 40% volume growth
  • Drought impacted agricultural operations, but Logistics business saw improvements
  • Overall assessment of the HY performance

Harare- TSL Limited, a diversified conglomerate with operations spanning agriculture, logistics, and real estate in Zimbabwe has expanded its export footprint by establishing a new market in Zambia according to the company's latest half-year financial results for FY2024.

This came amid tobacco paper volumes growing by 40% than the prior year, as the market continued to exhibit a positive response to the locally produced and coated tobacco paper. However, Hessian volumes declined by 18% during the period, attributable to a reduction in the national tobacco crop due to the drought conditions experienced by farmers.

The company's overall agricultural business units were adversely impacted, including its agricultural trading and farming operations. Agricura, the group's agricultural inputs and services division, recorded depressed volumes compared to the prior year, reflecting the detrimental effects of the El Nino-induced drought.

The company's management noted that the strategic initiative to enhance production capacity in the animal health remedies segment is progressing well, with the construction of the dedicated plant underway and anticipated for completion in the second half of the year.

In the farming operations, the banana plantation was reportedly affected by the drought conditions. As a response, the winter cropping plan was significantly reduced to accommodate all crops under irrigation.

The company's strategy to focus on the larger contracted tobacco market segment yielded positive results, with 83% of the total volumes handled during the period coming from this segment. However, tobacco contract volumes were 7% below the prior year, while independent auction volumes were 57% lower, as the independently funded tobacco crop market continued to shrink, representing only 6% of the national tobacco crop.

The logistics business recorded improved volume growth, supported by the new business model that provided end-to-end support to customers across the value chain. Tobacco handling volumes were 26% ahead of the comparative period due to increased volumes from existing clients, while general cargo handling volumes were 47% higher due to increased fertilizer received via the Beira corridor.

Despite the overall performance tilting more towards the negative side, the company remains committed to pursuing its key strategic initiatives aligned with its "moving agriculture" strategy. Cost containment and cash flow management will be a priority for the remainder of the year, as the company navigates the persistent challenges in the operating environment.

Overall Assessment

The mixed performance of TSL Limited during the first half of the fiscal year will have a significant impact on the company's full-year financial results. On a positive note, the company's expansion into the Zambian tobacco paper market and the improved performance of its logistics business provide a foundation for potential offset to the challenges faced in its agricultural operations. The 40% increase in tobacco paper volumes and the 26% and 47% growth in tobacco handling and general cargo handling, respectively, demonstrate the company's ability to capitalize on new opportunities and optimize its operations.

However, the substantial declines in the company's agricultural business segments are likely to weigh heavily on the overall financial performance. The 18% drop in hessian volumes, the depressed volumes across the agricultural trading, farming, and inputs divisions, as well as the impact on the banana plantation due to the drought, will translate into reduced revenue and profitability from these core business units. Additionally, the shrinking of the independently funded tobacco crop market, with a 57% decline in independent auction volumes, will further exacerbate the pressure on the company's agricultural performance. The 7% decline in tobacco contract volumes compared to the prior year will also contribute to lower overall revenue and earnings.

To offset the negative trends in its agricultural operations, TSL Limited will need to capitalize on the successes in the tobacco paper export market and the logistics business. Strengthening its position in these areas, while simultaneously implementing effective cost-control measures, will be crucial in determining the company's overall financial performance for the full fiscal year. The successful completion of the animal health remedies production capacity expansion project could also contribute to improved earnings in the second half of the year, providing a potential uplift to the company's bottom line. However, the company's ability to navigate the significant headwinds, particularly in its agricultural business segments, will be a key determinant of its financial results for the full fiscal year 2024.

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