We have extracted the financial summary from the 2019 Interim Report of Zambeef Products Plc , listed on the Lusaka Securities Exchange under the share code ZAMB.zm. Zambeef Products Plc is the largest vertically integrated food retailing brand in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, stock feed and flour.
The first six months of the 2019 financial year have seen the Zambeef Group continue to grow. Good revenue was achieved through our retail channels, stockfeed division and wheat mill. Revenue for the Group increased by 15.5 per cent. in ZMW and decreased by 4 per cent. in USD, while Gross Profit margins decreased from 37.6 per cent. to 33.2 per cent. resulting in Gross Profits increasing by 2 per cent. in ZMW from ZMW461.1m to ZMW470.6m (decreased by 15.3 per cent. in USD from USD46.6m to USD39.5m). Overheads increased by 15.2 per cent. in ZMW (decreased by 4.3 per cent.in USD) from ZMW347.7m to ZMW400.5m (USD35.1m to USD33.6m). The weakening of the achieved Gross Profit percentage resulted in the Group delivering Operating profits of ZMW11.4m versus ZMW62.3m (USD1m vs USD6.3m) which represents an 81.8 per cent. decrease in ZMW and an 84.8 per cent. decrease in USD.
Interest costs reduced by 10.6 per cent. in ZMW (25.7 per cent. in USD) as a result of lower debt levels. As a result, Zambeef reported a loss after tax of ZMW31.8m vs a profit after tax (excluding discontinued operations) of ZMW23m (loss of USD2.7m vs a profit of USD2.3m).
The highlights of this period were the 14.9 per cent. in ZMW increase (USD decrease 5.1 per cent. in revenue in from its core Zambian Retailing operations to ZMW882m from ZMW768m (USD74m from USD78m). Other highlights were the strong revenue growth in both our stockfeed operations and our wheat mill.
Retailing and Cold Chain Food Products (CCFP
Zambeef’s chain of 216 retail outlets – both own-branded and within Shoprite supermarkets – remain at the heart of the business.
Zambeef reported a 14.9 per cent. increase in revenue from its core Zambian Retailing operations to ZMW882 million (2018: ZMW768 million), bolstered mainly by increased sales of stockfeed, edible oil and flour.
Gross profit was down by 8 per cent. to ZMW84 million (2018: ZMW91.3 million). This was due to a change in sales mix, where disproportionate sales of lower margin products grew at higher rates than our higher margin products. Zamhatch margins were also lower due to low day old chick selling prices.
Masterpork Limited has continued to be profitable during the period and the Group is pleased to report a return to profitability of Master Meats Nigeria and Master Meats Ghana.
Zambeef’s stockfeed operations continued to grow during the period under review, recording revenue growth of 34.1 per cent. vs the prior period (ZMW412.3 million vs ZMW307.6 million; 98,936 tons vs 95,245 tons). However, the higher revenue was at lower margins than the previous period due to higher input costs and strong competition. The stockfeed division Gross Profit margin reduced from 26.9 per cent. to 18.8 per cent. compared to the prior period. This resulted in a reduction in Gross Profit from ZMW82.8 million to ZMW77.5 million. Since 31 March 2019, the stockfeed division has seen improving margins.
The Cropping division finished the first half ahead of the prior period, despite a decrease in soya bean prices from circaUSD430/t in the previous period to USD390/t during the period under review. The cropping division Gross Profit increased from ZMW78.8 million to ZMW93.3 million which resulted in EBITDA increasing from ZMW23.9 million to ZMW36.8 million.
After a fair performance for the first six months Zamhatch is increasing production of its Cobb500 chicks to 500,000 a week from the current level of 345,000.
Close to 50 percent of the chicks are sold on the open market through Zambeef Macro outlets and the remainder feed into the Zam Chick broiler operation. Zambia has recorded some of the fastest growth rates in the regional poultry sector owing in part to our investment.
Zambeef’s wheat mill produced 8,618 tonnes of flour in the six month period, ahead of budget.
A USD450,000 capital investment in production at Zamleather’s Zamshu brand will double capacity from 500 to 1000 pairs per day, the majority of which will be sold through Zambeef retail stores and Shoprite
We anticipate the macro-economic climate to remain challenging in the second half of the financial year.
The depreciation of the Kwacha in May 2019, and continued concerns in some quarters over Zambian government debt repayments, is likely to place renewed pressure on market sentiment, investment and ultimately consumer spending, and we expect this to impact on our retail business in the coming year.
These difficult times place a renewed emphasis on the ability of Zambeef’s management and staff to work strategically, think long-term and develop innovative solutions that address market conditions.
This is one of Zambeef’s strengths that has stood it in good stead as it celebrates its Silver Jubilee in 2019.
The focus for the next six months will be on:
- Maintaining consistent revenue growth through the retail network and stockfeed operations with strong focus on customer care;
- Improving cash conversion from strong working capital control and tight control on Capex;
- Strategic focus on cost saving measures.