Listed engineering group, Zimplow Limited says a deal to secure a new earth-moving equipment supplier for its subsidiary; Barzem Enterprises is imminent after the official distributorship of the Caterpillar (CAT) franchise was terminated on 30 September 2022.
Barloworld Equipment UK which owns Caterpillar ended its relationship with Barzem Enterprises of almost 70 years after announcing that it will now distribute its CAT brand independently in the country.
This coupled with inflation adjusted loss of ZW$ 358 million in the six months to June 2022, has left Barzem Enterprises’ going concern status in question. However, management is hinging hopes on the new supplier to turn around fortunes of the ailing subsidiary.
“The Directors consider that there is no material uncertainties that may cast significant doubt over the above stated assumption as the judgment is premised on the fact that Zimplow being a 51% shareholder in Barzem is in an arbitration process with Barloworld Equipment UK, a 49% shareholder in Barzem,” said the group in its interim results statement.
“Furthermore, Zimplow is at an advanced stage in concluding discussions with a view to acquiring a new supplier of earthmoving equipment where business operations will be operated under Barzem assets.”
However, the group says the potential total retrenchment costs associated with this transition is an estimated ZW$ 417,285,140.53.
It was a difficult first half of the year for Barzem as it also experienced delays in the remittance of foreign payments via the auction system causing parts and equipment orders to be delayed or cancelled.
The business unit has therefore been seized with value preservation actions in preparation for Zimplow to transition to a new supplier of earth moving equipment albeit under a new corporate identity.
Meanwhile, the Group recorded growth in revenue of 24 percent compared to prior year driven the by positive operational performance and volumes growth in key segments of the Group.
Profitability was 64 percent ahead of prior year supported by a 12 fold increase in exchange and fair value gains.
“The Group remains focused on realigning the working capital position given the need to rely on internal resources arising from increased lead times, delayed remittance of auction funds and reduced demand following the liquidity squeeze driven by monetary policy measures,”
“The Group is geared on strengthening its balance sheet position by reducing foreign liabilities, and repositioning the Group to deliver earth moving equipment through a new Original Equipment Manufacturer (OEM) or supplier.”
At Trentyre, due to the stock supply gaps in Q1, new tyre sales were 33 percent down on prior year. On the other hand, retreading volumes grew positively by 61 percent compared to the previous year driven by new processes, technologies and equipment installed at the factory to enhance capacity. The unit will seek to stabilize the sales of new tyres in the second half of the year.
At Scanlinks trucks and buses, volumes for trucks and buses grew by 33 percent and 100 percent compared to same period last year. In 2021, Scanlink built a strong base in aftersales performance which has been sustained this year as service hours were level against the comparative period.
Powermec recorded an impressive performance buoyed by the continued improvement in reputation in service delivery by the business unit given the instability on the power grid. The unit recorded a 62 percent increase in service hours sold compared to prior year and sold 34 percent more power in KVA than 2021.
CT Bolts – Fasteners CT Bolts sold 12 percent more tonnage compared to 2021 same period under review.