Performance overview
Zambeef’s official financial year came to a close on 30th of September 2020, and with that came release of the company’s trading status as of then. According to their update, the Group seems to be thriving this particular financial year despite of all the set-backs and challenges they and the majority of other businesses faced due to the global Covid-19 pandemic.
The leading cold chain foods company announced that their Earnings before interest and tax (EBIT) as well are their Profit before tax were over their market expectations by 25% at the close of the financial year. In spite of how well the business was doing, they saw a significant profitability drop in the second half of the year due to the sharp and costly depreciation of the Zambian Kwacha. At the end of the first half of the year, the kwacha to dollar was at ZMW 18.06 and as of 30th September 2020, it increased to ZMW 20. The group also experienced increased input and production costs as well as foreign exchange losses on their debt which is denominated in foreign currency.
However, Zambeef has proven to be handling the losses exceptionally well by ensuring that the flexibility of their balance sheet is maintained and mitigating their increased costs. The sale of their farm in Sinazongwe in April 2020 helped the company significantly by cutting their debt by almost 50% and thus reducing it to $39 million from the $67 million it was in 2019.
Highlights from the Half Year Performance
In the first half of the financial year, Zambeef generated a revenue of ZMW 1.798 billion and calculated a gross profit of ZMW 626 million. The revenue increased by 27% and the profit by 33% in comparison to the previous half year period. It recorded an operating profit of ZMW 125 million, a 1,003% increase from the previous period amount of ZMW 11 million. Therefore, in total, the company realized a profit of ZMW 2 million unlike in the previous half year where the company calculated a loss of ZMW32 million.
The company incurred administrative costs amounting to ZMW 501 million, a 9% increase from the previous half period. This was partially attributed to an inflation rate of 14% in that particular period. There were several factors which contributed to an increase in the financial costs by 33%. These factors included a rise interest rate, local currency depreciation and an increase in the working capital the company employed.
Summary
The official audited figures of the complete financial year are set to be released in December 2020, therefore it cannot be said for sure how well the company did overall this financial year. Despite the immense pressure that the Zambian economy was and is currently under as well as with the contribution of the effects of Covid-19, Zambeef’s overall trade performance has remained secure and sufficient.
Looking at the half year performance, the company could potentially out-perform their previous financial year. Zambeef’s ability to remain sturdy and produce increasing profits throughout seemingly the worst economic environment Zambia has experienced is promising for their end of year figures. It would be interesting to see how the company faired throughout the lock down/ quarantine period as the second half period began just before the start of the lockdown. Factors such as the increased need for food within households and the decreased need for it in restaurants and hotels etc. (due to closures and reduced operating hours), further currency depreciation, rise in inflation, and a reduction in international travel/ trade could play key roles in the company’s overall financial performance.