Following its initial public offering in 2019, ZAFFICO announced an approximately 34.4% reduction in earnings for the financial year 2019 from 2018, according to its first set of published financials since the IPO.
“The Company maintained good profitability over the reporting period with the profit for the year amounting to K78 million”, read a statement from its SENS announcement issued by the company on 16th March 2020.
According to published financials, “the revenue for the year ended 31 December 2019 stood at ZMW282,528,341 compared to ZMW244,715,056 for the prior year showing an increase of K38 million”. 89.7% of the revenue came from ‘pine saw logs’ which saw an increase of 8.1% from the previous year. “Pine saw logs accounted for ZMW253,668,440 of the total revenue compared to ZMW234,798,441 for the previous year”.
On the back of the 2018 performance which lead to healthy cashflows, the company embarked on reinvesting and scaling up its existing plantations. “The key highlights under plantation activities in the year 2019 were the replanting of 2,222 hectares on the Copperbelt Province and the establishment of 1,100 hectares of new exotic forest plantations spread over four provinces namely Luapula, Muchinga, Northern and North-Western”. This led to a 73.6% increase in cost of sales and 63.5% increase in operating costs subsequently leading to the reduction in Profit on account of an increase in operational costs attributed to the establishment of new plantations giving rise to increased staff costs and general administration expenses as stated by the company.
The management team is well aware that over-dependence on pine saw logs is not strategic hence they also continued pursuing diversification. “The continued operation of our Pole Treatment Plant which was operationalized in December 2017 remains our anchor diversification and value addition project”. The cash flow statement showed an increase of 20.5% in investing activities.
So far, the financial performance is consistent with the company’s 2020 to 2024 strategic plan. The company’s strategy includes:
- Replanting of clear-felled and fire-damaged areas in our forest plantations;
- Expanding forest plantations to other provinces;
- Diversification of Corporation business by optimizing value addition.
With the IPO concluded, the company has also achieved its objective of mobilizing resources for operations and investment. Due to the nature of the business, front-loading cash is inevitable as they forecast to grow value for investors.
In terms of leadership, investors in the company will have a wait a little longer for a permanent CEO. “The year 2019 was a year of transition for the Company and a number of developments took place including changes at Board level and in the Office of the Managing Director”, read the statement from the Board Chairperson, Anne Doma Gray-Kunda. With this, the Board Chair was signaling the movements in the office of the CEO. “Mr Frightone Sichone, former Managing Director’s employment contract came to an end on 31st October 2019 after unbroken 10-year service to the Corporation. In the Interim, Mr Manuel Mutale was appointed to oversee the operations of ZAFFICO as Managing Director until a permanent replacement is appointed”.