AGRICULTURAL outfit, TSL Limited says multiple exchange rates used by local suppliers to price products weighed heavily on the business, resulting in increased operating costs.
Currently, the country has one official exchange rate that is at US$1:$944,71.
However, this rate has mostly been dismissed as it does not tally with the cost of living and general prices of goods and services on the market. Instead, the parallel market rate is mainly considered to be the more accurate reflection of the Zimbabwe dollar’s value against major currencies, with the current parallel exchange rate standing at US$1:$1 800.
In a statement attached to its financial results for the year ended October 31, 2022, TSL said costs increased by 162% owing to interest rate hikes.
“As in prior year, the group continued to earn a portion of its revenue in foreign currency which is converted and reported in ZWL using the official exchange rate. Multiple exchange rates were used by local suppliers to price products and services resulting in a significant increase in operating expenses,” TSL said.
“Operating profit before fair value adjustments was subsequently 26% below last year. Finance costs increased by 162% on prior year largely attributable to interest rate hikes by the monetary authorities. Consequently, the group moved to extinguish its ZWL-denominated facilities to take advantage of more sustainable financing.”
TSL reported that the Tobacco Sales Floor handled 23,1 million kilogrammes (mkg) of tobacco in the year due to a smaller crop and a shrinking independently grown crop against 24,3 mkg in prior year translating to a 5% decline.
TSL also revealed that its strategy to serve a much larger contracted tobacco market is yielding fruit, with 62% of the total volumes handled coming from this segment.
“The business successfully opened a new floor in Mvurwi and the volumes therefrom were pleasing. This complements the business’ decentralised operations in Karoi and Marondera which were opened in 2021,” TSL said.
“TSF continued to hold the largest market share in the independent auction segment (71%) and achieved the highest seasonal average price of US$3,24 (up from US$2,86 recorded last year) against the national average price of US$3,06.
TSL said Propak Hessian volumes were 15% below prior year levels owing to a reduction in the independent auction segment.
“The new tobacco paper manufacturing line, which was commissioned in prior year, produced a high-quality, competitively priced paper that the market responded to positively. Paper volumes consequently grew by 24%. This strategic move is in line with the group’s sustainability drive,” TSL added.
However, TSL indicated that yields were up on prior year on wheat and commercial maize, adding that the improved water and weather conditions resulted in banana plantation production growing by 27%.
General cargo volumes were significantly ahead of prior year due to improved fertiliser volumes.
Green tobacco handling volumes increased by 32% due to the new floor opened in Mvurwi coupled with the provision of handling services to new tobacco clients.
TSL’s fast-moving consumer goods business continued to be affected by global supply chain challenges and hence, volumes were depressed.
TSL’s transport division volumes were 9% ahead of prior year due to an increase in volumes for tobacco bales transportation from decentralised tobacco floors.