REG - Zambeef Products PLC - Interim Results

Zambeef ProductsAnnouncement

21/06/2024 13:00

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RNS Number : 4409T  Zambeef Products PLC  21 June 2024

 

 

 

Zambeef Products plc

("Zambeef" or the "Group")

 

Interim results for the half-year ended 31 March 2024

 

Zambeef (AIM: ZAM), the fully integrated cold chain food products and retail
business with operations in Zambia, Nigeria and Ghana, today announces its
results for the half-year ended 31 March 2024.

 

Financial Highlights

 Figures in 000's                                            2024         2023         %            2024       2023    %
                                                             ZMW          ZMW                       USD        USD
 Revenue                                                     3,413,329    2,784,261    22.6%        144,144    158,738        -9.2%
 Change in fair value of biological assets                   768,623      484,630      58.6%        32,459     27,630         17.5%
 Cost of sales                                               (3,066,356)  (2,394,019)  28.1%        (129,491)  (136,489)      -5.1%
 Gross profit                                                1,115,596    874,872      27.5%        47,111     49,879         -5.5%
 Administrative expenses                                     (757,446)    (658,098)    15.1%        (31,987)   (37,519)       -14.7%
 Distribution Expenses                                       (78,634)     (68,801)     14.3%        (3,321)    (3,923)        -15.3%
 Net impairment losses on financial assets                   (280)        (449)        -37.6%       (12)       (26)           -53.8%
 Other income/(expenses)                                     (86,122)     (47,950)     79.6%        (3,637)    (2,734)        33.0%
 Operating profit                                            193,114      99,574       93.9%        8,155      5,677          43.6%
 Share of loss equity accounted investment                   (17,000)     (1,415)      1101.4%      (718)      (81)           786.4%
 Finance costs                                               (108,251)    (54,087)     100.1%       (4,571)    (3,084)        48.2%
 Profit before taxation                                      67,863       44,072       54.0%        2,866      2,512   14.0%
 Taxation charge                                             (7,263)      (14,405)     -49.6%       (307)      (821)   -62.6%
 Group income for the period from continuing operations      60,600       29,667       104.3%       2,559      1,691   51.3%
 Profit/(Loss) from asset held for sale after tax            -            (10,654)     -100.0%      -          (607)   -100.0%
 Group income for the period                                 60,600       19,013       218.7%       2,559      1,084   136.1%

 EBITDA*                                                     297,172      229,377      29.6%        12,549     13,078  -4%
 Gross Profit Margin                                         32.7%        31.4%                     32.68%     31.4%
 EBITDA Margin                                               8.7%         8.2%                      8.44%      8.2%
 Debt/Equity (Gearing)                                       45.9%        35.2%                     39.65%     35.2%
 Debt-To-EBITDA                                              6.4          5.66         13.3%        6.0        4.5     32.2%

 

* EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, loss from equity accounted investments, profit on disposal and
net unrealised foreign exchange losses.

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.

 

KEY FINANCIAL HIGHLIGHTS

 

The Group achieved 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.

 

Finance costs increased by 100% in kwacha terms, attributed to the increased
interest rates and extended utilisation of facilities to aid our expansionary
activities.

 

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 comparable period'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.

 

The Group remains steadfast in its commitment to fortifying its brand equity
and providing customers with high-quality products. With our diversified and
vertically integrated business model, robust brands, and effective management,
we are well-positioned to capitalize on future opportunities and navigate
potential threats with resilience and agility.

 

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 improve cash generation and profitability and delivery of
shareholder value. The Board is 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.

 

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.

 

16 September 2024 will be the eighth anniversary of British International
Investment plc's (BII) investment in the Company. After this date BII's
conversion rights on their convertible redeemable preference shareholding
("Preference Shares") will increase materially, from currently one-for-one new
ordinary share, to one for 3.0833 (recurring) new ordinary shares. BII is the
Company's largest ordinary shareholder and also holds all Preference Shares.
The Company has the right to redeem all or part of the Preference Shares at
the redemption price, which would give BII a 12% compounded annual return on
their investment, subject to a minimum of USD 0.77 per preference share (less
dividends received). However, the likelihood of such a repayment by the
Company in this financial year, or in the medium term, is currently considered
by the Board to be extremely unlikely.

 

Commenting on these results, Non -Executive Director and previously Interim
Chair Ms. Monica Musonda said:

 

"The past financial year presented numerous challenges, which continued into
the first half of the current year. The macroeconomic environment witnessed
ongoing deterioration, marked by high levels of inflation and exchange rate
volatility. The depreciation of the Kwacha against major foreign currencies
and the far-reaching adversities brought about by the El Nino weather event
led to escalated costs in critical inputs such as energy, grain and imported
inputs thereby putting pressure on margins. The country continues to see a
tightened monetary policy to counter inflation and currency depreciation which
is further putting pressure on consumer share of wallet."

 

"Despite these formidable challenges, our management team remained resolute in
our strategic objectives. Through concerted efforts focused on revenue
maximization, volume growth, and cost management, the Group was able to
achieve commendable profitability growth. This performance underscores our
resilience in an ever-evolving market and underscores the strength of our
vertically integrated business model, which remains pivotal in creating
enduring value for our esteemed shareholders."

 

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
(http://www.zambeefplc.com/) (http://www.zambeefplc.com/) or contact:

 

 

 Zambeef Products plc                                          Tel: +260 (0) 211 369003
 Faith Mukutu, Chief Executive Officer
 Mboo Mumba, Chief Financial Officer
 Cavendish Capital Markets Ltd (Nominated Adviser and Broker)  Tel: +44 (0) 20 7220 0500
 Ed Frisby/Abigail Kelly (Corporate Finance)
 Tim Redfern (ECM)
 Autus Securities Limited                                      Tel: +260 211 840 513
 Mataka Nkhoma, Sponsoring Broker

 

 

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 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.

www.zambeefplc.com (http://www.zambeefplc.com)

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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