Operating environment

The complex operating environment persisted with the local currency depreciating by 19% against the United States Dollar in the quarter. The disparity between the official and alternative foreign currency exchange rates continued to widen resulting in inflationary pressures.

New COVID-19 infections increased during the quarter; however, businesses operated under more relaxed lockdown measures.

The country experienced a late onset of the rainy season which negatively impacted the uptake of agricultural inputs. Whilst a good rainy season had been forecast, the outturn was erratic, with some parts of the country being negatively impacted by the passage of the Tropical Storm Ana weather system.

The Tobacco Industry Marketing Board announced 30 March 2022 as the commencement of the tobacco marketing season, a week earlier than in the previous year. Indications are that National tobacco volumes are expected to range between 10% and 15% below prior year.

Business performance

Group revenues in the first quarter are mainly from supply of agro-inputs, provision of logistics services and real estate services primarily to the agriculture industry. Revenue growth of 72% and 69% was recorded in inflation adjusted and historical terms respectively for the quarter.

Preservation of shareholder value continues to be a key priority. The Group started executing strategic initiatives which will be partly funded from borrowings. Gearing for the quarter remained low with satisfactory interest cover.

Agriculture Operations

Tobacco Sales Floor is well advanced in preparation for the tobacco marketing season which will start on 30 March 2022. The business is setting up a new decentralised floor in Mvurwi to augment the Harare, Karoi and Marondera floors. This is expected to improve tobacco volumes to be handled in the year.

Propak Hessian commenced distribution of tobacco packaging materials during the quarter. Volumes of hessian wraps are ahead of prior year whilst tobacco paper is 16% above same period last year. The business is adequately stocked for the season.

Agricura’s volumes across all major product lines were depressed against prior year due to the late start of the rainyseason which resulted in a shift in volume uptake. However, there was significant volume growth in fertilisers compared to last year due to availability of stocks and favourable pricing.

In the farming operations, tobacco, maize and soya bean crops are growing well and yields are expected to be satisfactory. The banana plantation recovered from the prior year drought resulting in improved yields. The increasing dam water levels are expected to be adequate for the planned winter crop.

Logistics Operations

The rail initiative from Maputo to Harare positively impacted volumes in the General Cargo and Ports divisions although shortages of empty containers persisted. Distribution volumes are 49% behind last year as most customers’ volumes slowed down.

Premier’s forklift hours are down 9% in the quarter due to slowed activity among major clients.

Avis car rental days are 74% ahead of prior year as lockdown restrictions were less stringent in current year.

Real estate operations

Performance in the real estate operation remains satisfactory. Space leased out was 10% above prior year due to the contribution of the new warehouse that was under construction in prior year.

Outlook

The operating environment is expected to remain complex. The global developments in Eastern Europe will have an impact on supply chains and availability of critical raw materials, exerting real inflationary pressures in the country. As the country enters the winter season, COVID -19 infection rates will need to be closely monitored to ensure levels do not necessitate further lockdown measures. The onset of the tobacco marketing season is expected to improve volumes through the Group’s tobacco related operations. The Group continues to undertake key strategic initiatives in pursuit of its “moving Agriculture” strategy.

By Order of the Board

Fadzayi Pedzisayi
Company Secretary
17 March 2022