Zambia Sugar is one of the largest companies on the Lusaka Stock Exchange with a market cap of K12.2 billion. Zambia Sugar shares trade at roughly K2.5 on the LUSE. The company was founded in 1964 and is estimated to produce between 300-400,000 metric tonnes of sugar annually. The company was listed on the Lusaka Stock Exchange in 1996 and is headed by CEO Rebecca Katowa.
Earnings
The company has boasted an increase in revenue of almost 13%, with reported revenue increasing from K2.9 billion to K3.3 billion. Operating profit however saw a decrease of -13% shifting slightly from K269 Million to K234 million. This is a healthy profit and will translate to a consistent dividend payment. Last year they declared at K0.08 per share from similar profit margins, this year it has tripled to K0.24 . It is worth noting that the company made an astounding improvement to their operating profit with a 30% increase (from K600 m, 2019 to K774 m, 2020). This year the company was paying a tax equivalent to 30% of operating profit with an 800% increase on total tax paid in 2019 ( K36 m, 2019 – K214 m, 2020).
The International Market
In the international markets sugar producers globally have struggled with a tumultuous year with the price peaking at $0.16 per pound in February and hitting a bottom of $0.10 per pound in May. This came as a result of the two months lockdown interfering with supply chains. Zambia Sugar argued the tumbling kwacha value did not heavily impact the business as they reduced their export exposure by 27%. The company is known as one of the largest exporters in the country with a large demand for their product in the European Union. Zambia Sugar however saw a 15% increase in domestic demand which helped reduce exposure to the COVID 19 economy.
Value Chain and Production
The company suffered a significant impact to their supply chain over the course of the year, having stated :
“The company faced significant disruptions to the supply chain particularly relating to spares, chemicals and other imported inputs. Significant costs were also incurred on the estate as well as the surrounding community to mitigate the potential effects of a infection outbreak” – Per a Press Release
They ended the year with a total financial cost of K327 m with an increase of 10% from 2019. This is attributed to an increase in the company’s debt. They have stated they will target lower costs for their 2021 results as the book is currently being anchored by the repayment of a ‘long term debt’ facility which has been settled. The company has been reclassified as both an agriculture and manufacturing entity which is why they have experienced substantial changes to their tax base. We believe the company is perfectly positioned for a strong 2021.