Zambeef reports US$1.4m loss before tax despite rise in revenue

ZAMBIA – Zambian Integrated cold chain food products and agribusiness company Zambeef, has reported a rise in revenue by 23.6% in Kwacha terms and a 5.8% decline in US dollar terms in the full year period ended 30 September 2020, to ZMW3.9 billion (US$239.6 million).

The company earned gross profit of ZMW1.22 billion (US$75.2 million) which was up in Kwacha terms by 12.4% but down by 14.4% in US dollar terms.

According to the LSE listed company, the revenue and profit growth was achieved in the face of a challenging operating environment, characterised by the onset of a global Coronavirus pandemic and macro-economic headwinds.

In addition, 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.

Despite the setbacks, its strong underlying performance was driven by growth in the stockfeed, dairy and beef divisions as well as management’s continued efforts of driving efficiencies to enable sustained top-line growth while looking for opportunities to optimise costs.

The group generated operating profit of ZMW210.5million (US$13.0 million) compared with ZMW161.2 million (US$13.1 million) in the prior financial year.

Stockfeed division was the largest contributor of the group’s operating profit due to a combination of increased sales volumes, and robust cost management on the back of improved operational efficiencies. The division sold 242,700 tonnes of feed in 2020, compared with 218,769 tonnes in 2019.

The combined Retail and Cold Chain Food Products division posted a marginal 1.8% growth in operating profit in Kwacha terms on the back of an 18% growth in revenue.

Zambeef’s chain of 236 retail outlets – both own-brand and within Shoprite supermarkets – remain at the heart of the business, with demand from customers driving supply.

The group’s focus during the 2020 financial year was to optimise its existing retail store performance as they rolled out four new macro outlets in strategic locations.

Zambeef generated operating profit of ZMW210.5million (US$13.0 million) compared with ZMW161.2 million (US$13.1 million) in the prior financial year.

Under its cropping division revenue grew 37% from the previous year, despite a reduction in volumes, due to a good summer crop price and translational currency effects.

Despite the gains reported, the group registered a loss before tax of ZMW22.7 million (USD1.4 million) compared with a profit before tax of ZMW38.7 million (USD3.1 million) achieved in the prior financial year.

The loss position is mainly attributed to a deferred tax asset impairment, higher financing and exchange losses following the depreciation of the local currency.

Zambeef expects the macro-economic climate to remain challenging in the 2021 financial year but is committed to continued strengthening of its earnings potential and unlocking value through reducing debt levels in the medium term.

During the period under review the company entered into a binding sale and purchase agreement with Chenguang Biotech (Zambia) Agri-Dev Limited for the sale of Sinazongwe Farm.

The disposal was executed in March 2020 for a cash consideration of US$10 million. Zambeef will use the proceeds to pay down its debt as they continue de-leveraging.

“Our strategic focus is to optimise our asset use and maximise returns. We remain focused on our core businesses, in which we strive to be the best in class,” said Walter Roodt, CEO Zambeef.

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