Zambia Sugar Plc (ZMSG.zm) HY2019 Interim Report

We have extracted below the Company Secretary’s Statement from the 2019 half year interim report of  Zambia Sugar Plc (ZMSG.zm), listed on the Lusaka Securities Exchange:

Review

Cane supply and quality have been trending above that of the past three years mainly due to improved bulk water supply and infield irrigation, better aphid and black maize beetle control measures as well as an increased area due to better farming practices and improved field specific nutrition program. This recovery resulted in Sugar production for the 2018/19 farming season ending at 400 000 tons compared to 353 000 tons in the prior season. The domestic market performance has continued on the positive trajectory largely driven by continued optimisation of route to consumer to enhance market penetration and availability, optimisation of product portfolio to ensure needs of all consumer segments are met.

Despite growth being recorded in Regional market sales, performance continues to be impacted by the surplus world sugar supply which has resulted significant volumes of world market sugar finding its way into the region affecting demand and putting pressure on margins. Proactive measures taken to reset the cost base through the implementation of a project called Project 400, has had a positive impact on half year earnings.

Total revenue for the 6-month period to 28 February 2019 was K1.219 billion, 14% above the comparative period of K1.065 billion mainly due to improved cane supply and higher sales demand. Operating profit for the 6-month period was K190 million compared to the K150 million operating profit in the comparative period. This is mainly driven by the higher net revenue, increased production levels and strict cost control measures in place. Finance costs, however, increased from K126 million in the 6 months to February 2018, to K140 million in the reported period, the result of increased Treasury bill auction rates. Headline earnings for the 6-month period ended February 2019 was K30 million, 68% above the comparative period at K18 million.

Directorate

Mr Norman Mbazima was appointed as a Director of the Company with effect from 26 February 2019.

Prospects

The outlook for the second half is expected to take a turn with economic uncertainty, increased regulation and the introduction of Sales Tax putting pressure on margins. Sugar production for the March 2020 season is expected to exceed the March 2019 seasonal and growth is expected to continue in both the domestic and regional export markets although margins on exports will remain under pressure from low global sugar prices

Dividends

Due to the high debt levels, no interim dividend has been declared.

By order of the Board
Mwansa Mulumba Mutimushi
Company Secretary