The only tree processing company listed on the Lusaka Securities and Exchange has reported its half-year performance which is weaker than anticipated due to reduced sales on account of COVID 19 and challenging negotiations suppliers.
The unaudited half-year results come right after the company listed on Zambia’s stock exchange. “Following a successful Initial Public Offering (IPO), the Company was listed on the Lusaka Securities Exchange (LuSE) on 12th February 2020 with a broad shareholder representation which includes the general public, employees of the Company, and Institutional investors”.
Like many companies locally and abroad, the global pandemic has not spared the tree processing company as issues around the supply chain have been impacted leading to changes in operations. “In the wake of the Covid-19 pandemic, the Company has deployed and is actively enforcing the measures prescribed by the Ministry of Health (MOH) to minimize the spread of the virus in order to protect employees, customers, suppliers and other stakeholders in the areas where the Company operates”.
“Despite a challenging business environment in the first half of the year, the Company continued on a profitable path with positive cash flows generated from operating activities”. This is because ZAFICCO’s asset base is unmatched in Zambia hence competitive forces are not an issue.
Furthermore, the company remains focused on its core competences. “Plantation and other silvicultural activities also progressed well during the period under review”.
New investors in the company will be disappointed in the lower revenues reported. “However, Revenues for the current period were lower when compared with the same period last year largely due to the delay in the commencement of the harvesting season this year”. Stakeholder management will be key for the company as “the delay arose mainly from the lengthy negotiations between the Company and the associations representing its principal customers for pine and eucalyptus round wood”. Furthermore, inventory management also remains crucial as this year’s allowable cut for pine round wood had been reduced compared to last year in line with the Company’s stock levels.
On profitability
“The Gross Profit and Net Income were also lower for the first half of this year compared to the same period last year driven primarily by the lower revenues. The Company’s Balance Sheet remains strong with a healthy liquidity position”.
The Business Outlook
The company believes that the effects of Covid-19 will likely continue to challenge many businesses, including ours. However, the Company is confident that the backlog of sales experienced in the first quarter of this year will be recovered in the second half of the year. The Company is also actively pursuing opportunities to increase its sales of treated poles so as to mitigate the effects of reductions in the annual allowable cut for pine roundwood. These efforts are on top of the Company’s new focus on improving its productivity levels across its business processes so as to remain competitive.