FIDELITY MHLANGA

LISTED diversified concern, Tobacco Sales Limited (TSL) suffered a sharp volumes decline across its subsidiaries during the third quarter ended July 2020, mainly due to a shorter tobacco season.

The expectations in the tobacco industry were that national tobacco volumes would be lower by between 10% and 15% than the 258 million kilogrammes achieved in prior year. Currently at 182 million kg, indications are that the national crop will fall short of the original target.

A low national output affected independent auction volumes at Tobacco Sales Floor at 5,7 million kg. This was 73% below prior year attributed to the lower tobacco output, the late start to the tobacco season and the auction floors not receiving the requisite approvals to decentralise operations.

TSL bemoaned the late announcement of decentralisation of contract floors, which was done at the onset of the tobacco marketing season.

However, TSL still holds the largest market share in this segment and has the highest seasonal average price.

“Contracted volumes handled for tobacco merchants at 7,9 million kg are 45% below the same period last year. Work is being undertaken with industry players to ensure a smoother tobacco marketing season in 2021,” TSL company secretary James Machando said in a trading update.

The late start of the tobacco selling season and the decline in national tobacco crop caused a decline in Propak Hessian volumes by 21% .

The group’s Agricura segment registered a growth in market share and volumes across most product lines, largely attributable to product availability and more attractive pricing on locally manufactured products.

“In the farming operations, tobacco yields were satisfactory. Approximately two thirds of the crop had been sold and pricing was marginally lower than in prior year. Due to low dam water levels, the winter wheat programme was scaled back and water rationing was undertaken on the banana plantation. The business has opted not to sell the harvested maize and soya bean in the current period,” Machando said.

Tobacco handling volumes were 4% behind prior year due to the late start of the tobacco selling season and delays in tobacco processing.

Volumes in the ports business decreased by 37%, due to generally slower movement of both imports and exports owing to the Covid-19 pandemic.

Volumes in the freight forwarding and customs clearing business were depressed as imports by the customer base remains subdued.

Handling volumes at Premier Forklifts were 18% below prior year due to the delayed start of tobacco processing.

Avis’ rental days were 39% below prior year as the business was significantly affected by the ban on both local and international travel.

Meanwhile, forklift sales were also depressed as most customers held back on capital projects under lockdown.

The distribution division recorded significant growth in volumes as new customers were secured. Occupancies remain satisfactory with voids in the quarter at under 5%.

The group said it remained profitable during the quarter despite generally depressed volumes adding that cash generation remains satisfactory with most of the group working capital requirements being funded from internally generated resources.

“Construction of a 10 000 square metre world class warehouse is progressing well, although delays have been encountered in the steel supply chain. The warehouse is scheduled for completion and occupation in February 2021,” Machando said.

“The operating environment is expected to remain difficult for the remainder of the year. With the introduction of the foreign currency auction system, the availability of foreign currency for restocking and capital investments is expected to continue to improve. A more stable exchange rate will minimise business disruptions,” the company said about the outlook.