Zambeef has posted 45% increase in revenue and 40% increase in gross profit (in US Dollar terms) in comparison to the previous year, attributed to the appreciation of the kwacha, according to the Half Year Results issued by the company on 15th June, 2022.
Performance Overview
The period saw relative macroeconomic stability with the kwacha appreciating relative to the US Dollar and inflation on a steady downward trajectory. However, input costs to our livestock divisions increased as a result of increasing commodity prices and fuel costs. Together with a tight monetary policy, this resulted in constrained consumer spending which affected the demand for our products.
However, the Group posted results that were ahead of market expectations, driven by good performance in our cropping and stockfeed division and continued focus on cost control.
Market Share gains and increased Layer feed prices in our stock feed business resulted in increased profitability and sustained margins.
The Group faced margin pressure arising from a rise in input costs such as Soya and energy across our value chains.
However, our diversified portfolio of brands and vertically integrated businesses ensured the impact is balanced across the divisions, thereby enabling the overall group to profitability growth.
Key Financial Highlights
Revenue was ZMW2.6 billion (USD148 million) and we achieved a gross profit of ZMW853 million (USD49 million), respectively 19% and 15% above the prior year in kwacha terms, and up by 45% and 40% in US dollar terms, respectively. Performance improvements in USD terms was due to underlying performance and the appreciation of the kwacha (Average rate across the half year under review K17.34/USD compared to K20.98/USD in the previous corresponding period).
The group delivered operating profit of ZMW230.5 million (USD13.2 million), equating to a growth of 49% in kwacha terms and 80% in USD terms, compared with ZMW154.8 million (USD7.4million) in HY2020.
The Group’s strong performance was driven by performance in the Cropping and Milling divisions. Management continued optimising top line growth through revenue management initiatives while the continued cost control measures helped deliver strong Earnings Before Interest Taxes, Depreciation and Amortisation (EBITDA), and improved operating leverage.
Market share gains in our feed milling business resulted in increased profitability and sustained margins while improved commodity pricing drove performance in our Cropping business.
Strategic Focus
Our strategic focus remains to optimise our asset utilisation and maximise returns. We remain committed to focusing on our existing core businesses, in which we strive to be the best in class, continued divesture of non-core assets and a fit for purpose people strategy. As part of delivering on our strategic imperatives, the business will progressively turn to towards capacity expansion opportunities across our business, which will see increased profitability in the medium to long term.
Outlook
We anticipate macro-economic stability for Zambia to continue over the medium term supported by improved investor sentiment, elevated copper prices and the possibility of an International Monetary Fund supported debt management program.
Our strong brands will help us maintain customer loyalty while the vertically integrated business model positions us well to secure both supply and a market for our products. The future recovery in the economy and a strong management team have positioned us well for improved stakeholder value creation in the coming years.