Zambeef Plc | Interim Trading Update – March 2014
March 31st, 2014
(“Zambeef” or the “Group”)
Interim Trading Update
Zambeef, the fully integrated agribusiness with operations in Zambia, Nigeria and Ghana, provides an update on its performance for the half-year ended 31 March 2014. Interim results will be announced during the week commencing 16 June 2014.
Overview
The Group expects revenue for the six months to 31 March 2014 to be in line with market forecasts, and overheads, depreciation and financing costs also to be in line with management expectations. This reflects progress in Zambeef’s ambition to become one of the leading food producers in the region, with Dairy and West Africa performing well, together with the early benefits of the joint venture with Rainbow Chickens starting to come through.
However, a combination of extreme exchange rate volatility, increasingly competitive markets coupled with aggressive competitor pricing strategies and the effects of animal disease will mean the Group will announce a loss before tax for the first half of the year. This is despite tight controls on costs and an ongoing focus on developing the Group’s offering to achieve higher margins and underpin competitive leadership.
Exchange Rate Volatility
The Zambian kwacha has depreciated significantly during the period, falling to a low of ZMW 6.46: USD 1 on 21 March, a depreciation of over 21 per cent. from the year-end exchange rate of ZMW 5.32: USD 1 on 30 September 2013. This has resulted in an escalation in Zambeef’s dollar-denominated operating costs, particularly in the edible oils, stockfeed and cropping divisions.
Remedial action by the Government appears to have stemmed further losses but the kwacha remains relatively weak. On 21 March 2014, the Finance Minister revoked, with immediate effect, two Statutory Instruments impacting on foreign currency: SI 33, implemented in 2012, which enforced the use of local currency in all local transactions, and SI 55, introduced last year, which allowed the central bank to monitor foreign currency flows.
The implications of the increase in foreign exchange volatility have only become apparent in recent months, and it is disappointing to have to announce that the financial impact on the Group is substantial…
To read the full interim trading update, please download the document on the link below:
