Absa Bank Zambia comes to aid of Zambeef, issues US$12.6m from government backed stimulus financing package

ZAMBIA – Zambian Integrated cold chain food products and agribusiness company Zambeef, is one of the beneficiaries of the government’s K10 billion (US$575.5m) stimulus package, aimed to help cushion local businesses from the negative impact of the COVID-19 pandemic.

Late last year, the government through the Bank of Zambia, established a Targeted Medium-Term Refinancing Facility to provide short-term liquidity through commercial lending institutions such as Absa.

Tapping into the financing, the country’s largest retailer has signed an agreement with Absa Bank Zambia to receive K220 million (US$12.6m) from the government-backed COVID-19 stimulus package.

Zambeef Products has indicated that it will utilize the funds to clear a significant slice of its external debt.

The drawdown will enable the retailing and agribusiness giant to repay a significant portion of its US-dollar denominated debt, in line with the company’s pledge to streamline its balance sheet and reduce exposure to foreign currency fluctuations.

The group reported net debt of K1.1 billion (US$63m) as of March 31, 2021 and is expected to close at K714.8 million (US$41.14m) by the end of the financial year, explained Zambeef Chief Financial Officer Faith Mukutu.

Zambeef’s retail revenue is primarily in local currency, while the cropping division’s revenues are US dollar-denominated, matching its input and capital expenditure currency.

Its long-term loans are provided by three local banks, along with German development bank DEG and the World Bank’s International Finance Corporation (IFC).

“The facility will enable us to support our growth goals and help ensure the long-term profitability of the group, which is a key player in the economy, accounting for 1 percent of GDP,” said Faith.

Speaking on the partnership, Absa bank Zambia PLC Managing Director Mizinga Melu highlighted that the deal is momentous, “Because we go beyond short-term financing. As a Bank, we have always committed to playing a pivotal role in the Zambian economy by bringing possibilities to life for businesses in key economic sectors like Agriculture.

“This stimulus package agreement to the value of K220 million (US$12.6m) is concrete proof of our commitment.”

Zambeef expects earning growth despite tough operating environment

In its full-year ended September 2021, Zambeef expects its revenue to be between 10% – 15% ahead of current market expectations, with EBITDA and EBIT being ahead by 10% – 12%.

Adjusted Profit Before Tax is expected to be 65 – 75% ahead of current market expectations.

Despite the rising input costs and global food prices, and a difficult operating environment resulting from the 2020 economic and Covid-19 related uncertainties, the positive full year performance has been driven by sustained consumer demand for our products.

The macroeconomic fundamentals remained relatively stable during the financial year in the context of the previous comparative year.

The local currency depreciated at a much slower rate in the first half and experienced steep appreciation in the second half.

Increased consumer spending stemming from the Covid-19 economic stimulus package resulted in increased demand for our products.

The good rainfall season helped alleviate load shedding and therefore positively impacted on the financial performance.

The continued focus on cost management across the business has maintained profitability with exchange gains and lower interest costs resulting in a higher Adjusted Profit Before Tax.

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