Operating Environment

Economic Environment

• Marked by inflationary pressures, persistent power outages and liquidity challenges in both local and foreign currency, elevated interest rates.
• Growing trend in dollarisation in the economy – higher proportion of transactions in US$.
• Change in consumer spending patterns – more informal.

Agricultural Sector

• 2022/23 summer cropping season was reasonable across most of the country, with adequate rains.
• National tobacco volumes (new record) – 296 million kgs, 43% ahead of prior year.
• National average tobacco price – US$3.03/kg, 1% below prior year price of US$3.06/kg.
• Independently grown tobacco crop closed at 7% of the national crop.

Prioritisation

• Enhancement of shareholder value through sustainable growth
• Maintaining a low gearing
• Positive cash generation
• Reinvestment in expansion of operations
• Dividend payments to shareholders

Financial Performance

Revenue

• Revenue growth underpinned by strong volume performance across most business – particularly tobacco related businesses.
• Foreign currency revenues recorded at official exchange rate.

Operating Profit

• ZWL$ cost structure inflated due to exchange rate volatility.

Finance Cost

• Local currency borrowings which had unsustainably high interest rates were paid off early in the year.
• Current loan book is in US$

Business Overview

Agri-inputs

Agricultural Packaging

• Propak hessian volumes up 32% – stock availability and larger tobacco national crop size.
• Tobacco paper volumes up 27% – positive market response to locally coated paper.
• Strategic move to increase paper production in line with the Group’s sustainability drive.

Agricultural Trading

• Mixed volume performance for Agricura.
• Better performance from Animal health remedies and new grain protectants – product availability.
• Margin pressure negatively impacted performance of the Unit.
• Acquired shareholding of minority shareholder in Agricor (Private) Limited.
• Acquisition expected to increase flexibility for business to expand and deepen product offering to market.

Farming Operations

• Produced a superior quality of tobacco – achieved improved yields and price per kg.
• Favourable yields achieved on soya beans and commercial maize.
• Reduced wheat hectarage – electricity availability challenges.
• New banana plantation came into production – increased volumes.

Marketplaces

• Tobacco Sales Floor cumulatively handled 51.9 million kgs of tobacco –125% increase on prior year’s 23.1 million kgs.
• Strategy to serve the much larger contracted tobacco market yielding fruit – 75% of total volumes handled from this segment.
• Positive results attributable to a larger national tobacco crop, successful de-centralisation of operations and new customer acquisition.
• TSF still holds largest market share in independent auction segment.

Commodities Exchange

• ZMX introduced an orderly, streamlined, digitalized marketplace platform for trading and funding of agricultural commodities.
• Company is licenced to facilitate trade of 49 commodities (grains, cereals, pulses, horticulture and livestock).
• Liquid asset status for warehouse receipts successfully obtained during the year – significantly enhances cash flows for farmers.
• ZMX operations resulted in a number of policy amendments in agricultural marketing – will improve marketing, financing, and trading of agricultural commodities.
• Business is in its infancy. Trading volumes expected to increase in the near future.

End to End Logistics

• Increased volumes across most logistics’ divisions – new business model supporting customer throughout the value chain.
• Tobacco handling volumes up 96% – increased customer base
• Rail service from both Maputo and Beira continued to operate – satisfactory performance.
• Strong clearing and forwarding volumes – improved demand.
• General cargo handling volumes down 19% (reduced fertilisers).
• FMCG volumes up 32% – new business.
• Premier Forklift volumes up 16% – growth from new and existing clients. Fleet on hire grown by 32%.
• Forklift sales volumes at par with prior year.
• Vehicle rental days down 12% – decline in vehicle fleet.
• Current fleet replenished towards year-end.
• More vehicles will be added in FY 2024.

Infrastructure

• Occupancies, returns and level of voids satisfactory – improved demand for warehouse space.
• Completed construction of 9,000 square meter warehouse in Mvurwi – supported TSF decentralised operations.
• Construction of new world class 15,000 square meter warehouse in a prime location to be completed in Q2, 2024.

Outlook and Prospects

Key Priorities and Focus

Operating Environment

• Expected to remain difficult – proactively manage
• Lower than normal rainfall expected – some negative impact.

Strategy – Continue to pursue key “Moving Agriculture” strategic initiatives.

Investments – Several investments lined up to scale up capacity and improve efficiencies to provide superior offering to the marketplace.

Value Chains – Primarily Agriculture and Mining

Digitalization – Bearing much fruit – more digital investments earmarked for FY 2024.

Value Creation & Preservation – Continue to Enhance earnings, Returns on Invested Capital, Long Term Value Proposition and strengthen Financial Positioning

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TSL Limited FY 2023 analyst briefing presentation