Zambeef reports rise in half year revenue despite economic headwinds

ZAMBIA – Integrated cold chain food products and agribusiness company Zambeef has reported a rise in revenue by 27% in Kwacha terms and 9% in dollar terms in the half year period ended 31 March 2020, to ZMW 1,798 million (US$129.2 million) from ZMW 1,416.5 million (US$118.8 million) achieved in the same period in 2019.

The company earned gross profit of ZMW 626 million (US$45.0 million) which was up in Kwacha terms by 33% and in dollar terms by 14% from the previous half-year period.

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According to the company, the revenue and profit growth was achieved in the face of a challenging environment, demonstrating the group’s fundamental strength as a diversified and vertically integrated business.

The challenging operating environment was characterised by the onset of a global Coronavirus pandemic and macro-economic headwinds. Customer spending power was eroded as inflation soared due to the depreciation of the Zambian Kwacha against major currencies, fuel price increase and erratic electricity supply.

The company’s management continued to focus on cost control which ensured administration expenses increased by only 9% (7% in US$ terms) from ZMW 459 million (US$38.6 million) in the previous period to ZMW 501 million (US$36 million) in the current period, in the context of 14% inflation during the period.

The Group achieved an operating profit of ZMW 125 million versus ZMW 11 million (USD 9 million vs USD 0.954 million) recorded in the previous half year period, which represents a 1,003% increase in ZMW and an 846% increase in USD.

The increase in profitability was driven by increased sales volumes in the Cropping and Stockfeed divisions and pricing and cost optimisation initiatives undertaken by management across the company’s divisions.

Finance costs increased by 33% in ZMW and 14% in USD as a result of higher utilisation of working capital, rising ZMW interest rates and the depreciation of the Zambian Kwacha against the US Dollar, resulting in increasing interest on US Dollar facilities in Kwacha terms.

As a result, the group managed to generate a profit of ZMW 2 million (USD 0.154 million) compared to a loss of ZMW 32 million (USD 2.7 million) in the previous half-year period.

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Zambeef’s management remains committed to focusing on its core divisions to generate cash flow that will be channelled towards deleveraging the group.

The company operates a chain of 226 retail outlets and it also produces and distributes beef, chicken, pork, dairy, eggs, fish, flour and stockfeed in Zambia, Nigeria and Ghana.

It’s chain of 237 retail outlets – both own-brand (166) and within Shoprite supermarkets (71) – remain at the heart of the business, with demand from customers driving supply.

During the half-year period under review, the group continued to invest in the roll-out of two macro stores and two retail outlets in strategic locations.

Revenue in retail and cold chain food products grew 15% against the prior half-year period.

Cropping revenue increased by 71% due to improved maize and wheat volumes, coupled with better pricing obtained on maize sales.

The Stockfeed operations posted strong volume growth of 19% in the half-year period. This, coupled with strong revenue realisation, ensured healthy top-line growth.

Despite the challenges around load shedding and the drought impacting margins, gross profit grew 58% compared to the prior half-year due to improved manufacturing capacity utilisation and cost management.

The conclusion of the sale of Sinazongwe farm in April 2020 was a key milestone whose proceeds will go towards reducing debt.

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