- The half year period ended 31 March 2023 was characterised by a difficult trading environment due to constricted consumer spending amidst a tight monetary policy. This was further exacerbated by a rise in the cost of key inputs and commodities, particularly fuel, agriculture inputs and grain which in turn increased production costs to our livestock and cropping divisions.
- The local currency experienced a steady depreciation against the US Dollar with a sharp depreciation in March 2023.The key drivers for the depreciation were the increased demand for the USD, uncertainty over the debt restructuring and a sustained rise in global interest rates affecting participation of offshore investors in local bond auctions. The ZMW/USD exchange rate opened at K15.75 and ended at K21.31 (35% increase) which resulted in exchange losses of ZMW58 million in the first half of the year.
- Inflation saw a significant reduction in the period closing at 9.6% compared to 13.1% in the previous year.
- Despite the challenges noted above, Zambeef products remained top of mind of consumers and demand remained relatively strong with most product categories posting volume growth. Moderate pricing of our products and escalation in input costs put pressure on margins.
- The long-term stability of the economy is dependent on the successful negotiation of the debt restructuring by the government. We anticipate the copper price, which is a major foreign exchange earner for the country, to stabilise at current levels owing to a growing increase in global demand particularly from China. The newly introduced legislation of partial withdrawal of retirement benefits from the National Pension Scheme Authority Pre-retirement benefits law is expected to inject much needed liquidity in the economy which will drive economic growth.
- Zambeef remains well positioned to capitalise on the opportunities ahead and remains agile in the face of an otherwise difficult operating environment.
Key Financial Highlights
- Our revenue was ZMW2.78 billion and we achieved a gross profit of ZMW874.9 million, respectively 8.4% and 2.4% above prior year respectively.
- The Group delivered a half year operating profit of ZMW 99.6 million, representing a decline of 56.8% compared to ZMW 230.4 million in prior year. Performance against prior year was impacted by exceptionally higher price of grain in prior year from which the Cropping division benefited.
- The Group’s profitability was further impacted by escalation in cost of sales against prior year that could not be fully passed on to the consumer through price. Compared to prior year, the cost of maize purchased increased by ZMW80 million, the cost of soya by ZMW25 million and the company saw a sharp increase in agriculture inputs, by approximately ZMW67 million.
- Arising from the Group’s USD100m expansion strategy, net free cashflows were impacted by the capital expenditure spend of ZMW 566 million and working capital funding increase of ZMW 8.8 million primarily due to increased input costs.
- Finance costs reduced by 7.4% despite an elevated net debt position owing to a reduction in exposure to foreign denominated debt. The actions previously taken by the group allowed for ease of forecasting as well as reduction of currency risk.
- Our strategic focus remains to optimise our existing asset utilisation and maximise returns. We remain committed to our strategy of focusing on our core businesses, in which we strive to be the best in class. The continued investment in key strategic assets and divestiture of non-core assets will enable us increase cash generation and profitability and therefore continue to deliver shareholder value.
For further information, please contact:
Zambeef Products plc – Tel: +260 (0) 211 369003
Faith Mukutu, Chief Executive Officer
M’boo Mumba, Chief Financial Officer
Fincap (Nominated Adviser and Broker) – Tel: +44 (0) 20 7220 0500
Ed Frisby/Abigail Kelly (Corporate Finance)
Tim Redfern (ECM)/Barney Hayward (ECM)
Autus Securities Limited – Tel: +260 (0) 761002 002
About Zambeef Products PLC
Zambeef Products plc is the largest integrated cold chain food products and agribusiness company in Zambia and one of the largest in the region, involved in the primary production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, fish, flour and stockfeed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana.
It has 236 retail outlets throughout Zambia and West Africa.
The Company is one of the largest suppliers of beef in Zambia. Five beef abattoirs and three feedlots are located throughout Zambia, with a capacity to slaughter 230,000 cattle a year. It is also one of the largest chicken producers in Zambia, with a capacity of 8.8m broilers and 22.4 million-day-old chicks a year. It has the largest pig abattoir and pork processing plants in Zambia, with a capacity to slaughter 75,000 pigs a year, while its dairy has a capacity of 120,000 litres per day.
The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 7,787 hectares of row crops under irrigation, which are planted twice a year, and a further 8,694 hectares of rainfed/dry-land crops available for planting each year.
By Order of the Board
Mwansa M Mutimushi
LUSAKA, ZAMBIA 30 JUNE 2023
2023 March HY Financial Results (LuSE).pdf
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