Zambeef Products results for the half-year period ended 31 March 2024

June 21st, 2024

Overview

  • The reporting period was characterised by the ongoing unstable macroeconomic environment, with elevated inflation and exchange rate volatility. While there were positive developments regarding the government’s understanding with international bondholders on debt restructuring, significant underlying factors such as subdued copper mining activity and the adverse impacts of climate change on crop yields and rainfall patterns continued to exert pressure on the macroeconomic landscape. Liquidity remains tight due to the central bank’s stringent monetary policy aimed at controlling inflation and exchange rate depreciation. This has led to constrained consumer spending and high borrowing costs.
  • The Kwacha began the 2024 financial year at K21.10 per USD and depreciated to K24.93 per USD by the end of the period. Inflation rose from 12.6% at the start of the year to 13.7% by the end of the period, adversely escalating costs of essential inputs and commodities, such as fuel, imported materials, and grain, which ultimately increased production costs for our divisions. Despite these challenges, the Group achieved volume and revenue growth (in ZMW) in most divisions, building on the momentum from the latter half of 2023. This success was driven by a meticulous approach to revenue management and effective sales through regular price reviews and operational execution.
  • Despite the financial results for the half-year period not meeting expectations set at the start of the year, the Group achieved significant profitability growth, showcasing agility and adaptability in navigating the ever-evolving market and economic conditions. Management’s relentless focus on optimizing top-line growth through effective revenue management, coupled with stringent cost control measures, have been instrumental in striving for our financial goals.

Outlook

  • As we look ahead, our robust brand presence will continue to serve as a cornerstone in maintaining customer loyalty. Furthermore, our vertically integrated business model positions us favourably, ensuring a dependable supply chain and market for our products. We anticipate a stabilization in the economic environment following the recent understanding reached by the government with international bondholders regarding debt restructuring, coupled with the expected upswing in copper production and prices over the medium to long term. With these factors in mind, the Group is well-positioned to capitalize on the opportunities arising from a positive economic outlook, strategically investing for the future in anticipation of an upturn in consumer spending.

Key Financial Highlights

  • The Group achieved a revenue of ZMW 3.4 billion (USD 144.1 million), accompanied by a gross profit of ZMW 1.1 billion (USD 47.1 million). This represents a year-on-year increase of 22.6% and 27.5% in kwacha terms, respectively, and a year-on-year decrease of 9.2% and 5.5% in US dollar terms, respectively.
  • The Group delivered an operating profit of ZMW 193.1 million (USD 8.2 million), marking a significant increase of 93.9% in kwacha terms and 43.7% in US dollar terms compared to the prior year’s ZMW 99.6 million (USD 5.7 million). This remarkable growth underscores the effectiveness of our commercial strategy and the successful execution of strategic expansion projects.
  • Board expectations for trading performance reported in kwacha for the full year to 30 September 2024 (FY24) remain unchanged, and given some continued weakening of the kwacha, this now results in a small reduction in our USD reported revenue guidance for both FY24 and FY25, and a c.7% reduction in our USD reported profit before tax guidance for both FY24 and FY25.

Strategic Focus

Our strategic focus remains to optimise our existing asset utilisation and maximise returns. We remain committed to our strategy of focussing on our core businesses, in which we strive to be the best in class. The continued investment in key strategic assets and divestiture of non-core assets will enable us to increase cash generation and profitability and therefore continue to deliver shareholder value. I am pleased to report that our $100 million medium-term expansion plans are proceeding as scheduled. We have maintained our dedication to enhancing capacity and efficiency in Cropping, Milling, Stockfeed, Dairy, and Poultry.

The Interim Report for the half-year ended 31 March 2024 will shortly today be available on the Group’s website.

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

Zambeef Products plc
Faith Mukutu, Chief Executive Officer
M’boo Mumba, Chief Financial Officer
Tel: +260 (0) 211 369003

Autus Securities Limited (Sponsoring Broker)
Mataka Nkhoma (Sponsoring Broker)
Tel: +260 (0) 211 840 513

Cavendish Capital Markets Ltd (Nominated Adviser and Broker)
Ed Frisby/Abigail Kelly (Corporate Finance)
Tim Redfern (ECM)
Tel: +44 (0) 20 7220 0500

By order of the Board

Mwansa Mutimushi
Company Secretary

Issued in Lusaka, Zambia on 21 June 2024

Notes to Editors
Zambeef Products plc is the largest integrated cold chain food products and agribusiness company in Zambia and one of the largest in the region, involved in the primary production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, fish, flour and stockfeed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana.

It has 236 retail outlets throughout Zambia and West Africa.

The Company is one of the largest suppliers of beef in Zambia. Five beef abattoirs and three feedlots are located throughout Zambia, with a capacity to slaughter 230,000 cattle a year. It is also one of the largest chicken producers in Zambia, with a capacity of 9.48m broilers and 25.4 million day-old chicks a year. It is one of the largest piggeries, pig abattoirs and pork processing plants in Zambia, with a capacity to slaughter 75,000 pigs a year, while its dairy has a capacity of 120,000 litres per day.

The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 7,265 hectares of row crops under irrigation, which are planted twice a year, and a further 8,000 hectares of rainfed/dry-land crops available for planting.

DOWNLOAD: 2024 March HY Financial Results (LuSE).pdf