Zambia Sugar Plc recently notified shareholders through SENS Announcement that the Earnings per Share (EPS) for the financial year ended 31 August 2018 is expected to be approximately 65% higher than that for financial year ended 31 August 2017.
Now before stakeholders get excited by a prospectively higher bottom line when they publish their financials at the end of October 2018, we need to be reminded that this is a company that adjusted its financial year calendar. Therefore, as explained in their statement on SENS, “the increase in EPS for the financial year ended 31 August 2018 is due to the comparable period to 31 August 2017 being a 5– month period following the change in the company’s year-end to August. The financial year ended 31 August 2018, represents the first full year results since the change and thus the comparison is for a 12 month period against a 5 month period”. Therefore reviewing the audited financials will require a comparison of apples and mangos.
Needless to say, their statement confesses that the company has still been facing exogenous forces in the macro. “The Company’s financial performance continues to be impacted negatively by the surplus world sugar supply, which is finding its way into the Company’s primary regional markets, as well as increased incidences of smuggled sugar, which is affecting demand and putting pressure on margins”.
Michael McDougall (commodity broker at ED&F Man Capital Markets) was reported by the financial times stating that “the sugar market is finding it hard to get out from under the cloud of increased sugar production that is effectively the result of good weather and government policies” in April 2018. A couple of weeks later, the same publication reported that a rout in prices following the plummeting of the Brazilian real and continued concerns about the global supply glut.
However, despite these global headwinds, the Company’s performance in the domestic market has been positive owing to improved route to consumer capabilities. The continued focus on efficiencies and cost management across the business also contributed to cost containment with the consequence of improved operating profit.
Our focus will be set on what comes out of the audited financials which will be published later this month. In a year that also saw the company put a number of the staff on voluntary separation mid this year, their financial year ended on a positive note in terms of product diversity when they launched the new smaller and more affordable brown sugar packs that will now be available in 195 and 330 grams respectively. All eyes will be on Rebecca Katowa at the next annual general meeting.