The only listed sugar manufacturing company on Zambia’s Lusaka Securities Exchange (LuSE), Zambia Sugar Plc, has reported stronger sales growth at half year 2023 (period ending 28 Feb 2023) for their current financial year, according to information released by the company.
In a statement by the Company Secretary Harriet Kapekele – Katongo issued in Lusaka, Zambia on 16 May 2023, the total financial revenue for the six-month period to 28 February 2023 grew by 5% amounting to K2.35 billion largely driven by strong domestic and export sales.
The Company stated that the improvement in export proceeds was attributable to the depreciation of the Kwacha between December 2022 and February 2023. With domestic sales slowing down during the period under review, the company pivoted some sales towards the export market which led to export sales increase of 16% further contributing to the country’s much needed foreign exchange revenue generation.
Profitability increase was marginal for the period under review. The 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 realization and cost management despite significant increases in the cost of key inputs (fertilizers, chemicals, electricity, employee costs, packaging and fuel). Overall, costs increased by 11%.
The finance costs increased by 4% compared with the previous year from K29 million in 6 months to February 2022 to K30 million in the period under review because of higher facility utilization to cover off-crop costs.
In line with recent trends, suffice to mention that, gearing improved from 15% to 13% as at 28 February 2023. The 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. The earnings per share grew by 16% from 138.8 ngwee per share to 161.4 ngwee per share.
With regards to business Performance, Cane supply for the period under review increased by 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 tonnes compared to 3.158 million tonnes 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 tonnes higher than the comparative period last year. For the 2022/23 season 400,431 tonnes of sugar was produced compared to 390,206 tonnes in the 2021/22 season.
Compared to the same period, the previous year domestic sales volume was negatively impacted by the influx of illegal imports. In order to thwart the uncompetitive behavior, 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.
“The market experienced and continues to experience incidents of illicit trade, a matter which is of concern to the Company in particular, and the industry in general, because it robs the country of taxes, the opportunity for job creation from the farm level running all across the value chain. It also impacts health because it ignores food safety. To help curb this we are working with the Authorities including Regulatory Agencies in the country to sensitive consumers to be able to distinguish between our Whitespoon products and any counterfeits. We would further like to encourage consumers to purchase products from only trusted outlets in their communities and from those that are reputable on the market,” Zambia Sugar Corporate Affairs Director, Eugene Chungu, explained.
The Company expects to face further 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.
However, 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.
The Company does not plan to pay any interim dividend with the Board choosing to prioritize financing operational requirements.