The Anatomy of Zambeef’s 2016 Half Year Review
Agriculture, Zambeef Products Plc

“Doctor TFHZPC, we have a Zambian patient at reception who would like to see you. His symptoms include desire for aggressive growth through expansion by micro outlets. He currently exhibits growth through acquisitions. His desire for value is unabated.” – Nurse

I have been looking at your file patient ‘Z’. You have not been doing too badly of late. Your half year report for 2016 shows your continued focus on the core business: production, processing, distribution and retailing of cold chain food products. In short, you own and dominate your value chain making you a vertically integrated giant. You have also been aggressive in your expansion strategy albeit pursing stringent cost control. Tight fisted means you grow value. Literally.” – Dr. TFHZPC

“Doctor, what about his performance compared to this time last year?” – Nurse

On performance, I noted that your operating profit this year was up by over 200% compared to the same time last year. Phenomenal for a Zambian company.  There was an improvement on return on sales over the period with cost of goods sold against sales remaining fairly stable. Internally, there was a marked improvement in administrative expenditure which is essential for growing value. Keeping an eye on “SGA” is crucial to any business that seeks to generate value because this cost can destroy if not kept in check. There was also an upward improvement in turnover of inventory and fixed assets. The latter implies sweating of assets improved over the period.

“Doctor, what about their liquidity and risk?”

“There was a notable 2% drop in gearing, specifics will be known at the end of the year, however it shows prudence in capital budgeting. In addition, your currently obligations are easy covered by easily liquefied assets showing healthy liquidity. This has been boasted by your improved working capital management. Money is coming in quicker than it was a year ago. Evidence of this is through your USD7.4million Zamhatch breeder farm deal which eliminated bottlenecks in your supply chain. The joys of vertical integration.”

Will Shareholders be happy?

“Return on equity and capital employed have shown tremendous improvement. This will certainly please investors looking for equity growth (in this case north of 13%).  They will have confidence in the business model. The macro outlet strategy will grow the company’s revenue as the company reaches the masses.”

“What are the prospects for the future?”

 

“I do not possess a crystal ball but what I do know is that there are echoes of an agenda that promotes agriculture. A SWOT on this would imply possible threats of competition with opportunities of further growth for the company through the incentives government will put in place. Keep an eye on those agricultural subsidies though. There could be opportunity lurking in there somewhere. Needless to say, your strength as a highly liquid extant player will ensure you dominating the market for some time to come. If any competition gets out of line, medication for this would be an acquisition of the culprit if their numbers are right and their strategy is solid. You have done it before. We believe you will do it again. Nurse, next patient please.”

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