In accordance with the requirements of the Securities Act No. 41 of 2016, Zambia Sugar Plc announces its results for the 6 month period ended 28 February 2023.
COMMENTARY FOR THE HALF-YEAR PERIOD TO 28 FEBRUARY 2023
Financial Performance Review
Total revenue for the six-month period to 28 February 2023 grew by 5% to K2.35 billion largely driven by strong domestic and export sales performance. Improvement in export proceeds was attributable to the depreciation of the Kwacha during the period December 2022 to February 2023. Sales to the export market increased by 16% due to the availability of stocks following the slowdown in domestic demand. Compared to the same period the previous year, domestic sales volume was negatively impacted by the influx of illegal imports. The Company responded by implementing promotions and other non-price tactical measures and recovered some of the lost market share in the later part of the period under review.
Operating profit for the six-month period was K655 million compared to K644 million for the comparative period the previous year. The 2% increase in operating profit is mainly driven by improved price realisation and cost management despite significant increases in the cost of key inputs (fertilisers, chemicals, electricity, employee costs, packaging and fuel). Overall, costs increased by 11%.
Finance costs increased by 4% from the previous year from K29 million in the 6 months to February 2022 to K30 million in the period under review because of higher facility utilisation to cover off-crop costs. In line with recent trends, gearing improved from 15% to 13% as at 28 February 2023.
Headline earnings for the six-month period ended 28 February 2023 increased to K510 million from K439 million for the 6 months to 29 February 2022. Earnings per share grew by 16% from 138.8 ngwee per share to 161.4 ngwee per share.
Cane supply for the period under review increased 18% compared to the previous period due to an improvement in cane yields for the estate and out-growers. The upside in yields is mainly attributable to better climatic conditions experienced during the summer growing months and availability of power for irrigation. Total cane supplied for the 2022/23 season was 3.359 million tons compared to 3.158 million tons in the 2021/22 season.
The increase in cane supply resulted in a corresponding 11% increase in sugar production for the six-month period which was 15,200 tons higher than the comparative period last year. For the 2022/23 season 400,431 tons of sugar was produced compared to 390,206 tons in the 2021/22 season.
Domestic market sales were under pressure from illegal imports but recovered strongly towards the end of the period following the institution of promotions and other non-price interventions. Sales in the regional export market increased due to better stock availability and strong demand.
The Company expects to face challenges in the second half of the year due to economic uncertainties in the local economy, fluctuations in exchange rates and rising costs of commodities all of which will put pressure on sales and costs.
Higher sugar production is expected for the 2023/24 season following good rainfall received and improved performance from the factory as a result of works undertaken during off-crop to improve plant reliability.
Domestic sales are forecast to continue to grow in the coming months while the strong demand in the regional export market is expected to persist.
No interim dividend has been declared for the half-year period as the Board has prioritised financing operational requirements.