PERFORMANCE OVERVIEW

The half-year period ended 31st March 2020 (HY 2020) saw Zambeef post encouraging results in the context of a very challenging macroeconomic environment. During this period, the Zambian Kwacha weakened by 37%, resulting in short- to medium-term record inflation. The high inflation, coupled with a tight monetary policy, eroded the purchasing power of our customers. The challenges stemming from reduced electricity generation, on the back of a regional record drought, significantly increased operational costs which, in turn, impacted on margins as some divisions were unable to pass through the increases.

Despite the challenging economic environment and the uncertainty caused by the onset of the COVID-19 pandemic, consumer demand for Zambeef’s products remained robust, and the trading performance in the period has been satisfactory.

Zambeef’s chain of 237 retail outlets – both own-brand and within Shoprite supermarkets – 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.

KEY FINANCIAL HIGHLIGHTS

Revenue and gross profit for the period was ZMW 1,798 million (USD 129.2 million) and ZMW 626 million (USD 45.0 million), which was up in Kwacha terms by 27% and 33% respectively, and in dollar terms by 9% and 14% respectively, from the previous half-year period.

Management’s continued focus on cost control 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 recorded in the previous half year period (USD 9 million vs USD 0.954 million), which represents a 1,003% increase in ZMW and an 846% increase in USD. This 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 our 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.

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

Zambeef’s management will continue to focus resources on the Group’s profitable business divisions, whilst improving those divisions that need additional attention to ensure that all areas of the business contribute fully to Group profitability. In response to the current uncertainty of the COVID-19 situation, the Group is moving quickly to take appropriate actions to further manage costs and preserve balance sheet flexibility during this period. The conclusion of the sale of Sinazongwe farm in April 2020 was a key milestone whose proceeds will go towards reducing debt.

OUTLOOK

As previously announced, despite the uncertainty caused by the COVID-19 pandemic, the trading performance is expected to remain satisfactory for H2 2020 and, accordingly, for the year ending 30 September 2020, dollar revenue, EBITDA, EBIT and adjusted Profit Before Tax* are anticipated to be in line with market expectations.

* Adjusted Profit Before Tax is defined as excluding any realised or unrealised foreign exchange gains or losses and any losses or gains made from asset disposals.

Commenting on these results, Chairman Mr. Michael Mundashi said:
“The Zambian economy was under significant fiscal pressure during the period, which, combined with the shock of the COVID-19 pandemic on the global economy, led to reduced demand for copper and a sharp depreciation in the Kwacha. The subsequent inflationary impact resulted in a significant drop in our customers’ disposable income.

“Despite the challenging economic environment and the uncertainty caused by the COVID-19 pandemic, consumer demand for Zambeef’s products remained robust and the trading performance in the period was satisfactory.

“The Group continued with its long term strategy to invest in the roll-out of macro stores and retail outlets in strategic locations. The Group’s strategic partnership with Shoprite has been essential as we continue to observe growth through the Shoprite butcheries.

“Looking ahead, the macro-economic climate is expected to remain challenging for the rest of the financial year, characterised by a volatile Kwacha, continued electricity supply constraints and a potentially crippling COVID-19 pandemic. Despite this, the Group still expects to report Full Year results for the year ending 30 September 2020 in line with current market expectations.”

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

About Zambeef Products PLC

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 regions, as well as Nigeria and Ghana. The Group also has large cereal row cropping operations (principally maize, soya beans and wheat), with approximately 7,973 hectares of row crops under irrigation, which are planted twice a year and a further 8,776 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 March HY Financial Results (AIM).pdf

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