REG - Zambeef Products PLC - Half-year Results

Zambeef ProductsAnnouncement

30/06/2023 07:00

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RNS Number : 4621E  Zambeef Products PLC  30 June 2023

 

Zambeef Products plc

("Zambeef" or the "Group")

 

Interim results for the half-year ended 31 March 2023

 

Zambeef (AIM: ZAM), the fully integrated cold chain foods and retail business
with operations in Zambia, Nigeria and Ghana, today announces its results for
the half-year ended 31 March 2023.

 

Financial Highlights

 Figures in 000's                                          2023         2022         %             2023       2022       %
                                                           ZMW          ZMW                        USD        USD
 Revenue                                                   2,784,261    2,568,680    8.4%          158,738    148,136    7.2%
 Change in fair value of biological assets                 484,630      381,567      27.0%         27,630     22,005     25.6%
 Cost of sales                                             (2,394,019)  (2,096,854)  14.2%         (136,489)  (120,926)  12.9%
 Gross profit                                              874,872      853,393      2.5%          49,879     49,215     1.4%
 Administrative expenses                                   (658,098)    (597,097)    10.2%         (37,519)   (34,435)   9.0%
 Distribution Expenses                                     (68,801)     (29,850)     130.5%        (3,923)    (1,721)    128.0%
 Net impairment losses on financial assets                 (449)        -            100%          (26)       -          100%
 Other (expenses)/income                                   (47,950)     3,961        -1310.6%      (2,734)    228        -1299%
 Operating profit                                          99,574       230,407      -56.8%        5,677      13,287     -57.8%
 Share of loss equity accounted investment                 (1,415)      (1,287)      10%           (81)       (74)       9.5%
 Finance income                                            -            113          -100%         -          7          -100%
 Finance costs                                             (54,087)     (58,413)     -7.2%         (3,084)    (3,369)    -8.5%
 Profit before taxation                                    44,072       170,820      -74.2%        2,512      9,851      -74.5%
 Taxation charge                                           (14,405)     (33,587)     -57.1%        (821)      (1,937)    -57.6%
 Group income for the year from continuing operations      29,667       137,233      -78.4%        1,691      7,914      -78.6%
 (Loss)/ Profit from asset held for sale                   (10,654)     10,330       -203.1%       (607)      596        -201.9%
 Group income for the period                               19,013       147,563      -87.1%        1,084      8,510      -87.3%

 EBITDA                                                    229,377      310,422      -26.1%        13,078     17,902     -26.9%
 Gross Profit Margin                                       31.4%        33.2%                      31.4%      33.2%
 EBITDA Margin                                             8.2%         12.1%                      6.2%       12.1%
 Debt/Equity (Gearing)                                     35.4%        14.9%                      39.0%      14.9%
 Debt-To-EBITDA                                            5.7          1.9          196.5%        6.9        1.8        153.6%

 

 

PERFORMANCE OVERVIEW

The half-year period ended 31 March 2023 was characterised by a difficult
trading environment due to constricted consumer spending amidst a tight
monetary policy. This was further exacerbated by a rise in the cost of key
inputs and commodities which the Company's operations rely upon. Compared to
prior year comparative period, the cost of maize purchased increased by ZMW80
million (USD 4.6 million), the cost of soya by ZMW25 million (USD1.4 million)
and the Company saw a sharp increase in agriculture inputs, by approximately
ZMW67 million (USD3.8 million). Key to note among the various price increases
was also the volatility in the price of diesel, which in comparison to the
previous period went up by ZMW 20 million (USD1.1 million).  Invariably,
these increased factors impacted our cost of sales and these unanticipated
increases could not be fully passed on to the consumer and was contained by
the business.

 

The local currency experienced a steady depreciation against the US Dollar
with a sharp depreciation in March 2023 which resulted in exchange losses of
ZMW58 million (USD3.3 million). The key drivers for the depreciation were the
increased demand for the USD, uncertainty over the debt restructuring and a
sustained rise in global interest rates affecting participation of offshore
investors in local bond auctions. The ZMW/USD exchange rate opened at K15.75
and ended at K21.31 (35% increase).

 

Despite the challenges highlighted, the Group posted volume growth in most of
its divisions as the momentum of the second half of 2022 continued into the
current period, aided by a meticulous price moderation approach. The gross
profit margin for the period under review was 31.4%, a decrease of 1.8
percentage points from prior year. The decline in gross margin despite a 9.2%
growth in revenue highlighted the impact of the escalation in our input costs
with cost of sales increasing by 39.1%.

 

The outbreak of Contagious bovine pleuropneumonia (CBPP) disease towards the
end of the last financial year continued to impact the performance of our beef
division in the current period.

The accelerated slaughter of cattle resulted in the depletion of our cattle
herd in the feedlot and, therefore, impacted supply at a time when the Group
aimed to build up cattle stock.

 

The Group generated revenue of ZMW 2.78 billion (USD 158.7 million) and
achieved a gross profit of ZMW 874 million (USD 49.9 million) representing an
increase of 8.4% and an increase of 2.4% on the prior year comparative period
in kwacha terms, and an increase of 7.2% and decrease of 1.3% in US dollar
terms, respectively.

 

The Group delivered a half year operating profit of ZMW 99.6 million (USD 5.7
million), representing a decline of 56.8% in kwacha terms (57.3% in US dollar
terms), compared to ZMW 230.4million (USD 13.3 million) in the prior year
comparative period. Performance against prior year was impacted by
exceptionally higher price of soya beans and wheat in the prior year from
which the Cropping division benefited.

 

Finance costs reduced by 7.4% despite an elevated net debt position owing to a
reduction in exposure to foreign denominated debt. The actions previously
taken by the Group allowed for reduction of currency risk.

 

The US$100 million expansion programme which commenced last year is in
progress with most of these projects expected to be concluded in the coming
financial year. This has resulted in an increase in the Net debt to ZMW 1.4
billion (USD 67.4 million) at 31 March 2023 from ZMW 818 million ($45.3
million) at 31 March 2022. Of this capex funding increase was ZMW 566 million
(USD 32.2 million) whilst working capital funding increase of ZMW 8.8 million
(USD 0.5 million) primarily due to increased input costs.

 

Management continued optimising top line growth through revenue management
while the continued cost control measures positioned the Group on the path to
actualise its short to medium-term strategy.

 

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

 

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

 

The Board is committed to unlocking the value of its shares and is actively
engaging the Company's shareholder British International Investments Plc, on
the preference shares it holds.

 

We remain excited as Zambeef remains well positioned to capitalise on the
opportunities ahead with the progress made in the expansion of our cropping
operation and investment in production facilities."

 

 

 

Copies of Accounts the Interim Report for the half-year ended 31 March 2023
will shortly today be available on the Group's website.

 

 

 

 

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

 Zambeef Products plc                            Tel: +260 (0) 211 369003

 Faith Mukutu, Chief Executive Officer

 M'boo Mumba, Chief Financial
 Officer

 FinnCap Ltd (Nominated Adviser and Broker)      Tel: +44 (0) 20 7220 0500

 Ed Frisby/Abigail Kelly (Corporate Finance)

 Tim Redfern/Barney Hayward (ECM)

 Autus Securities
 Limited
       Tel: +260 (0) 761 002 002

 Mataka Nkhoma

 

About Zambeef Products PLC

 

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 8.8m broilers and 22.4 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  7,263 hectares of row crops under irrigation, which are
planted twice a year, and a further 7,830 hectares of rainfed/dry-land crops
available for planting each year.

 

 

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

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