Earnings season continues with the announcement of the financial results of Zambia’s biggest food distribution company. Zambeef in their press statement dated 2 December 2020, made available figures of how their financial year, ended 30 September 2020, went.
Sales revenue standing at rose by 24% to K3.88bn from the revenue of K3.13bn accumulated in the year ended 30 September 2019. The cost of sales increased by 30% from, K2.05bn in the year ended September 2019 to K2.66bn in the year ended September 2020. Comparing how cost of sales in each year interacted with their respective revenue reveals that financial year ended September 2020 had a greater cost of sales to revenue ratio at 0.69 compared to the year ended September 2019 with a cost of sales to revenue ratio of 0.68. This entails that per each unit of sale made, Zambeef incurred more in the year ended September 2020 than in the year ended September 2019.
Other notable increases in the costs include but not limited to taxation charge and loss made on translating foreign currency transaction and balances. Taxation cost increased from K2.8M in the prior financial year to a whooping K113M in the year ended September 2020, representing a 7500% increase. This was despite the fact the company made a tax deferment of almost K70M in the just ended financial year. With the kwacha depreciating by 54%, it is highly expected that increases in losses in foreign currency transaction would be there. The translating foreign currency row shows an increase of 273% from the K37M of the prior year to K138M in the year ended September 2020.
Although Zambeef made an operating profit of K 210M in the year ended September 2020 compared to the K161M made in the prior year, the increase in the costs incurred managed to erode the gains made and as consequence the company ended up making a loss after tax of K102M. This was in contrast to the profit of K18M made in the prior year.
Despite some of those challenges, Zambeef seems to have invested more in property, plant and equipment in the just ended financial year as compared to the prior year. Investments like these would entail an increase in the production capacity of the company. The company was not short on liquidity compared to the prior year as cash and cash equivalents increased from K57M in the prior year to K111M in the year that just ended.
Seeing that this a year that has been ravaged by Covid-19 which has perpetuated other economic woes such as the massive depreciation of the local currency against foreign currencies, in the country Zambia, it should not come as a surprise to note the difficulties with which several businesses have been able to endure in their operations.