Zambeef declares $6 million loss in 2020
Zambeef Products [ZMBF] is a multimillion dollar Zambian food processing company incorporated in 1994. The company boasts more than 15,000 hectares of arable land for all farming practices, though primarily the company is in the production of beef, chicken, pork and several animal bi-products. This year was volatile as the company officially left the Nigerian market, following news that Shoprite (its official partner) was also exiting. The company’s London stock price is down more than 50% over 10 years as the market proved ‘impenetrable’ and the company suffered significant losses. Despite this the company has posted strong results for a difficult year, it should be expecting to make a healthy profit next year once the global economy has fully recovered.
The Numbers
Over the last year the company earned a revenue of K3.8 billion, a 23% increase compared to 2019 (K3.1 billion). This came with an increase in gross profit from K210 million, with exchange losses of K137 million and taxation of K112 million creating a loss of K102 million overall ($6 million). The company is one of the largest exporters in the country, therefore the significant depreciation of the Kwacha (down -3% avg per month on the dollar) severely impacted profits. The companies exit from the west African market could significantly minimize this exposure over the next year (assuming the currency stabilizes).
The company claims they suffered significant losses as result of a reduced electricity supply (loadshedding). The subsequent spending on fuel for generators and a reported 49% increase in the electricity tariff contributed to the substantial increase in expenses; the cost of sales saw an increase of K600 (30%) million. There has been a substantial increase in the rate of inflation (avg 15% this year) on the growing administrative costs (up K100 million or 10%).
Company Response
In his foreword the CEO Walter Root stated:
“Zambeef management remains committed to achieving bottom line growth in line with our strategic objective of de-risking the business. However, we expect the volatility in the economy to continue impacting the spending power of our customers.”
A cautious outlook for the next year as we all monitor the pandemic. Zambeef is one of the largest beef exporters in the Southern African region; with demand for food rising rapidly in the region it is likely profit will stabilize. The company has the capacity to slaughter over 230,000 cattle per year and boasts a network of 65 retailers across Zambia. This makes them the largest processor of beef in the country. The price of beef saw a 4% increase in the local market (according to Zambeef number) while the live chicken (+36%) and egg tray (+27%) have shown promising signs.
Zambeef Stock Performance
Zambeef is one of very few Zambian owned companies listed on the London Stock Exchange and is currently valued at £7. In the global markets the company saw a 100% increase from mid April to June when the stock peaked at £8 (after a bottom of £4). Similarly its stock in Lusaka is up by 20% from K0.9 to K1.1 with the peak trade volatility between June and July. This could likely be in reaction to news of the ‘global food shortage’ as a result of the pandemics ruptured supply chains. Overall, it is difficult to measure company performance in 2020 due to the substantial disruptions to the global economy. I predict the company will make a recovery as they begin to focus on the Southern Africa region.