Zambeef releases its 2022 Annual Report

December 5th, 2022

Chairman’s Statement

Dear Shareholder,

I have the pleasure of presenting my report to you for the financial year ending 30th September 2022.

The financial year saw an improvement in economic sentiment following the successful holding of the general election in August 2021 and the peaceful transition of government. The Kwacha appreciated significantly and remained stable during the period. However, global economic headwinds contributed to the disruption of an otherwise positive trajectory for Zambia’s macroeconomic environment. The spill-over effects of the Covid-19 pandemic related supply disruptions on international trade, added layers of production complexities to the business as lead times for imported goods increased. Commodity prices, particularly crude oil, fertilisers and grain, escalated as a result of the Russia – Ukraine conflict. In addition, the period saw the outbreak of animal diseases such as, the African Swine Fever and Contagious Bovine Pleuropneumonia (CBPP) which respectively impacted our pork and beef businesses.

Despite the headwinds, management worked tirelessly to keep the business performing by focusing on enhanced bio-security risk, cost management, revenue maximisation and market share growth. As a result, the business posted positive financial results and is wellpositioned on the path to actualising its short to medium-term strategy.

The Group’s performance demonstrates its ability to remain resilient in the evolving market and illustrates the strengths of its vertically integrated business model, which is key to creating sustainable long-term shareholder value.

The Group’s performance demonstrates its ability to remain resilient in the evolving market and illustrates the strengths of its vertically integrated business model…

Strategy

The Group’s medium-term strategy is centred around optimising existing assets and investing in capacity for the future. It is with this in mind that the Group announced a US$100 million expansion programme during the year. This investment strategy is expected to increase the Groups various value chain capacities, and deliver developmental impact to the Zambian economy through job creation, increased tax revenue and supporting ancillary businesses such as small-scale farmers and small to medium-sized businesses. The expansion is expected to double the Mpongwe Farm row cropping capacity, and also to deliver significantly improved production efficiency and capacity through the downstream food value chains. The first crop from the expanded cropping operations is expected to be planted in the 2023/2024 financial with capacity upgrades to milling and processing facilities being run in parallel.

As part of the $100m expansion plan, we remain committed to maintaining a responsible business by building on the Environmental, Social and Governance (ESG) agenda. Therefore, the investment will see an improvement in the Group’s carbon footprint and livestock health and welfare.

As part of the divesture of non-core and low-returning assets, the Group exited from pig farming, pullet rearing and egg production during the year. Chiawa farm remains an asset held for sale. These divestitures will enable the business to focus on becoming best in class and improve the Group’s profitability.

The Board remains committed to achieving the Group’s strategic priorities while navigating the seasonal market and economic challenges. The following are the pillars on which the five-year strategy is underpinned:

  • Focus and strengthen our core business by investing in capacity and growing market share
  • Divestiture of non-core assets to free up resources
  • Develop a human capital strategy that aligns with business objectives
  • Strengthen our strategic partnerships
  • Enhancement of shareholders’ value

The Economic Environment

Despite the year 2022 being the second year since the outbreak of Covid-19, its impact on the economy compared to the prior year reduced tremendously due to the success of governments vaccination campaigns and the public’s adherence to public health measures.

The economy rallied in comparison to the corresponding period under review and saw stability in macroeconomic fundamentals. The ZMW/USD exchange rate averaged 17.18 down by 19% compared to 21.12 averaged in the previous corresponding period. The local currency has seen a steady appreciation since the start of the financial year despite moments of volatility. A tight monetary policy which saw the Monetary Policy Rate remain stable at 9%, relatively high copper prices and market confidence arising from the peaceful transition of power have been key in keeping the currency stable.

Inflation reduced significantly during the period under review, closing at 9.9% compared to 22.1% in the previous year. This drop came as a result of currency appreciation and a reduction in food inflation despite the escalation in diesel and petrol pump prices. Customers disposable income remained under stress as the effect of stable macroeconomic fundamentals had not yet fully trickled down to the consumers. Inflation for the period under review averaged 13.4% compared to 21.7% for the previous corresponding period.

Outlook

We anticipate macro-economic stability to continue, supported by improved investor sentiment leading to increased foreign direct investment. The Kwacha is also expected to remain stable across the 2023 financial year. The copper prices, which is a major foreign exchange earner for the country, is expected to stabilise at current levels as the worst effects of the manufacturing slowdown have tapered off. The inflation rate is expected to remain stable, although the outcome of the Russia – Ukrainian tensions could lead to further rises in global food and energy prices which still pose a risk of higher inflation locally. Of key concern is the emergence of escalating cost of funding as foreign currency liquidity migrates to the United States of America and the United Kingdom, where interest rates are rising.

Executive Management Changes

I am pleased to advise that on 1 July 2022, Ms Faith Mukutu was appointed Chief Executive Officer. She succeeded Mr Walter Roodt who served as Chief Executive Officer since January 2020.

Mr Roodt will continue full-time with the company focussing on Large livestock and Strategic Projects in an executive capacity to support the expansion programme referred to above. To ensure a smooth transition, Walter remains on the Board until 1st December, 2022.

The appointment of Faith represents the confidence the Board has in her ability to lead the business through the new phase. Since joining the Group in September 2019, as the Chief Financial Officer, Faith has been instrumental in driving the realisation of commercial value from our business having introduced a cost control culture, restructuring the group balance sheet and streamlining finance operations and reporting.

I am delighted that at the date of this report, the Board had announced the appointment of M’boo John Mumba as Chief Financial Officer, Mboo has also been appointed as an Executive Director of the Board.

M’boo takes on the role, following the promotion of Faith Mukutu, to Chief Executive Officer (CEO) on 1 July 2022. He joined the Zambeef Group in May 2020 as Project Manager before he took up the role of Group Head of Treasury and Administration. He has brought to the Company skills which combine industry, financial and banking experience of more than 16 years. His established professional background and valuable expertise is an asset to the Group.

Acknowledgement

On behalf of the Company and the Board, I would like to express my sincere gratitude to Messrs; Yollard Kachinda and Frank Braeken who resigned from the board on 14 April 2022 and 27 May 2022, respectively. Their dedication and contributions to the business during the period they served as Directors will be greatly missed. I am also indebted to Walter Roodt who, after his reassignment to a new role remained on the Board for a smooth transition. He has played a significant role in the Group and we all wish him all the very best in his new role.

I also thank my fellow board members for steering the Group through the year and positioning it for the next phase of growth. To our management and staff, I express my gratitude for another solid performance, dedicated efforts, and resilience in the face of challenges. I am proud of our achievements to date and I am excited by the potential opportunities upon which we will build our future progress.

Michael M Mundashi
Chairman

2022 Annual Report.pdf