Zambeef (AIM: ZAM), the fully integrated cold chain foods and retail business with operations in Zambia, Nigeria and Ghana, today announces its audited results for the year ended 30 September 2020.

PERFORMANCE OVERVIEW

The financial year ended 30th September 2020 (“YE 2020”) was characterised by a difficult operating and economic environment due to adverse macro-economic fundamentals and the Covid-19 pandemic. The Zambian Kwacha weakened by 54% against the USD, resulting in high inflation and reduced customer spending.

The Group also experienced challenges stemming from reduced electricity supply because of continued load-shedding, resulting in high diesel generator fuel expenditure and repairs and maintenance costs. This, coupled with a 49% increase in the electricity tariff at the beginning of the calendar year, significantly increased operational costs and eroded margins.

Despite the challenges noted above, Zambeef posted an operating profit of ZMW210.5 million (USD13.0 million), a 30.6% growth in Kwacha terms and 0.5% reduction in US Dollar terms, compared with ZMW161.2 million (USD13 million) in 2019. The Group’s strong underlying performance was driven by growth in the Stockfeed, Dairy and Beef divisions. The Groups achievement, in the face of challenging operational and economic headwinds, demonstrates its strength as a diversified and vertically integrated operation.

KEY FINANCIAL HIGHLIGHTS

Revenue and gross profit increased by 24% and 12% respectively in Kwacha terms for the Group due to pricing across most of the divisions despite an increase in input costs. However, due to the depreciation of the Zambian Kwacha, results in USD reduced by 6% and 15% respectively in comparison to 2019.

The continued focus on cost control helped deliver a below inflationary increase of 10% from ZMW 921 million in the previous corresponding period to ZMW 1 billion in the period under review.

Finance costs reduced by 15% in USD which can be attributed to the net debt reduction following improved operating cashflow generation and Sinazongwe sale proceeds. No new long term debt positions were undertaken by the Group and payments were made towards reducing principal amounts on term debt.

The Group ultimately recorded a loss of ZMW 102 million (USD 6.3 million) for 2020 compared to a profit of ZMW 18.5 million (USD 1.5 million) in the previous period. The loss can be mainly attributed to the operating profit growth erosion by foreign exchange losses, financing costs and the impairment of deferred tax.

Zambeef’s management remains committed to focusing on core divisions to generate cash flow that will be channelled towards deleveraging the business and investing in higher returning projects. Our plans are underpinned by:

• Consistent revenue growth through optimising existing retail infrastructure, driving our CCFP and Stockfeed operations;
• Continued capital investment in the best performing areas of the business;
• Cash generation through improved margins, cost control, working capital management and prudent capital expenditure;
• Continued divestment of non-core assets; and
• Environmental and food safety improvement projects.

Zambeef’s management will continue to focus resources on the Group’s profitable business divisions, while improving those divisions that need additional attention to ensure that all areas of the business contribute fully to Group profitability.

Commenting on these results, Chairman Mr. Michael Mundashi said:

“On the back of a challenging 2019 financial year, 2020 followed suit and proved to be an even tougher year for the Zambeef Group. The 2020 financial year was characterised by difficult economic and market conditions that were exacerbated by the Coronavirus (COVID-19) pandemic. Despite significant growth in the first half of the financial year, macro-economic headwinds – in particular those associated with the Kwacha depreciation – accumulated in the second half and negatively impacted the bottom line financial performance.”

“The Board believes the key to sustainable growth, while mitigating the effects of economic cycles lies in remaining committed to achieving its strategic priorities. As such, the key focus remains on the core divisions that generate sustainable and strong cash flows, while reducing debt to release cash for reinvestment in higher returning projects.

“We expect the macro-economic climate to remain challenging in the 2021 financial year, characterised by an increase in volatility. The country’s national debt level remains a threat to macro-economic stability in the short to medium term. We anticipate the COVID-19 pandemic will have minimal impact on our operations in 2021 as Zambia will adjust to living with the virus and resume life under the ‘new normal’.

“Zambeef continues to de-risk the business by focusing on the reduction of debt to reduce the impact of foreign currency volatility on future earnings. The net debt for the Group declined by 41% in Dollar terms and 10% in Kwacha terms during the 2020 financial year.

“The Group is committed to the continued strengthening of its earnings potential and unlocking value through reducing debt levels in the medium term. This will mitigate foreign exchange and interest rate risk exposures, and free up cash for reinvestment in higher returning projects.”

Copies of Zambeef’s Annual Report and Accounts for the year ended 30 September 2020 and Notice of Annual General Meeting (AGM) will shortly be available on the Group’s website.

The Group’s AGM will be held on the 24 th of December 2020 via Zoom at 10.00 a.m. (Zambian time).

For further information, please visit www.zambeefplc.com or contact:

About Zambeef Products PLC
The Zambeef Products PLC is the largest integrated cold chain food products and agribusiness in Zambia and one of the largest in the region, involved in the production, processing, distribution and retailing of beef, chicken, pork, dairy, eggs, fish, flour and stockfeed; throughout Zambia and the surrounding region, as well as Nigeria and Ghana. The Group also has large cereal row cropping operations (principally maize, soya beans and wheat), with approximately 7,787 hectares of row crops under irrigation, which are planted twice a year and a further 8,694 hectares of rain-fed crops available for planting each year.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.

• 2020 September FY Financial Results (AIM)
• 2020 September FY Financial Results (LuSE)

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