Disaster at TZI

Trans Zambezi Industries which was started in 1993 and had a wonderful first four years rescuing ailing companies like Art Corporation and Chloride which were about to sink and bailing out Zimbabwe Express Airlines when it was about to be still born had a terrible six months ending March making a loss of US$12.5 (about Z$225 million).

The company which was established as a vehicle for emerging market investors, and is incorporated in the Virgin Islands, says emerging markets throughout the world have generally not performed well and Southern African has not been an exception.

To make matters worse, Mario dos Remedios, the company’s former financial director and believed to have been the man behind the company’s acquisitions and company turnarounds resigned as an executive director in February and left the company altogether in May in what was perceived as a “conflict of interest”.

But although the company says considerable caution will be exercised when reviewing new acquisitions, it still remains optimistic that long-term prospects in Southern Africa are positive and attractive opportunities will arise from time to time.

According to a review of its operations for the first half of the current financial year, TZI says it made an operating profit of US$4 million but this was wiped out because of exceptional provisions totalling US$7.2 million and the elimination of good will which totalled US$8.3 million from the balance sheet. A further US$1.6 million was paid in taxation.

The industrial division which includes Art and Chloride did quite well contributing over 100 percent of the operating profit for the half year. Profitability of the division was, however, lower because US dollar prices of paper in the region fell by 10 percent.

The food and distribution division which is principally located in Zambia did very badly because of the pressure on disposable incomes. The situation seems to have even got worse after March, the company says.

Zambezi Ranching and Cropping saw its beef and milk prices decline by 25 percent from September. Agriflora’s exports were disappointing because of the lower volumes and weak prices due to an oversupply of flowers and dumping of vegetables from the Far East.

But prospects for the second half, the company says, appear to be bright with both improved volumes and margins.

The financial services division, mainly centred around Bard, was badly hit by the collapse of the United Merchant Bank as Bard held Z$90 million worth of Cold Storage Commission short-term paper, but the insurance business both in Zambia and Zimbabwe was reported to have gained market share.

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