Tobacco, storage, printing and packaging group, TSL had an operating income before interest of $145.3 million during the six months ending April, a 36 percent increase over the same period last year but this was reduced to 30 percent because of the considerably higher interest bill for Hunyani.
And the company says its earnings for the second half of the year will again be strongly influenced by the performance of Hunyani.
The company says tobacco prices have been disappointing both in US and Zimbabwe dollar terms because of an oversupply of lower grades of tobacco and lack of buying pressure from the merchants.
It says although the crop size dropped from an estimated 230 million kgs to 205 kgs, the larger tobacco crop this season compared to last year’s will to some extent offset the lower prices.
TSL says the storage, distribution and timber sectors of the company have been doing well and operating income from the printing and packaging division was also up because of an improved performance by Hunyani.
It was, however, necessary to alleviate the high borrowing of Hunyani which was incurred during the capital expenditure programme for the company which started last year in anticipation of a warrant exercise in February.
This, however, had to be put off and the capital expenditure programme curtailed. According to one market analyst the outlook for the group would appear to be fairly mixed.
Although there are a number of uncertainties within the agricultural sector, particularly regarding the land issue, the contribution to total operating income from tobacco sales is less than 20 percent, and the effect on the group should as a result not be that significant.
The group appears to be very dependent on Hunyani’s fortunes, being the major contributor to group turnover and operating income.
“One can only hope that measures are being taken here to reduce the level of debt within this operation,” the analyst says.