ZAM Zambeef Products Plc

Zambeef Products plc

("Zambeef" or the "Group")

Interim results for the half-year ended 31 March 2024

Zambeef (AIM: ZAM), the fully integrated cold chain food products and retail business with operations in Zambia, Nigeria and Ghana, today announces its results for the half-year ended 31 March 2024.  

Financial Highlights

* EBITDA is defined as earnings before interest, tax, depreciation, amortisation, loss from equity accounted investments, profit on disposal and net unrealised foreign exchange losses.

OVERVIEW

The reporting period was characterised by the ongoing unstable macroeconomic environment, with elevated inflation and exchange rate volatility. While there were positive developments regarding the government's understanding with international bondholders on debt restructuring, significant underlying factors such as subdued copper mining activity and the adverse impacts of climate change on crop yields and rainfall patterns continued to exert pressure on the macroeconomic landscape. Liquidity remains tight due to the central bank's stringent monetary policy aimed at controlling inflation and exchange rate depreciation. This has led to constrained consumer spending and high borrowing costs.

The Kwacha began the 2024 financial year at K21.10 per USD and depreciated to K24.93 per USD by the end of the period. Inflation rose from 12.6% at the start of the year to 13.7% by the end of the period, adversely escalating costs of essential inputs and commodities, such as fuel, imported materials, and grain, which ultimately increased production costs for our divisions. Despite these challenges, the Group achieved volume and revenue growth (in ZMW) in most divisions, building on the momentum from the latter half of 2023. This success was driven by a meticulous approach to revenue management and effective sales through regular price reviews and operational execution.

Despite the financial results for the half-year period not meeting expectations set at the start of the year, the Group achieved significant profitability growth, showcasing agility and adaptability in navigating the ever-evolving market and economic conditions. Management's relentless focus on optimizing top-line growth through effective revenue management, coupled with stringent cost control measures, have been instrumental in striving for our financial goals.

KEY FINANCIAL HIGHLIGHTS

The Group achieved revenue of ZMW 3.4 billion (USD 144.1 million), accompanied by a gross profit of ZMW 1.1 billion (USD 47.1 million). This represents a year-on-year increase of 22.6% and 27.5% in kwacha terms, respectively, and a year-on-year decrease of 9.2% and 5.5% in US dollar terms, respectively.

Finance costs increased by 100% in kwacha terms, attributed to the increased interest rates and extended utilisation of facilities to aid our expansionary activities.

The Group delivered an operating profit of ZMW 193.1 million (USD 8.2 million), marking a significant increase of 93.9% in kwacha terms and 43.7% in US dollar terms compared to the prior comparable period's ZMW 99.6 million (USD 5.7 million). This remarkable growth underscores the effectiveness of our commercial strategy and the successful execution of strategic expansion projects.

The Group remains steadfast in its commitment to fortifying its brand equity and providing customers with high-quality products. With our diversified and vertically integrated business model, robust brands, and effective management, we are well-positioned to capitalize on future opportunities and navigate potential threats with resilience and agility.

Our strategic focus remains to optimise our existing asset utilisation and maximise returns. We remain committed to our strategy of focussing on our core businesses, in which we strive to be the best in class. The continued investment in key strategic assets and divestiture of non-core assets will enable us to improve cash generation and profitability and delivery of shareholder value. The Board is pleased to report that our $100 million medium-term expansion plans are proceeding as scheduled. We have maintained our dedication to enhancing capacity and efficiency in Cropping, Milling, Stockfeed, Dairy, and Poultry.

Board expectations for trading performance reported in kwacha for the full year to 30 September 2024 (FY24) remain unchanged, and given some continued weakening of the kwacha, this now results in a small reduction in our USD reported revenue guidance for both FY24 and FY25, and a c.7% reduction in our USD reported profit before tax guidance for both FY24 and FY25.

16 September 2024 will be the eighth anniversary of British International Investment plc's (BII) investment in the Company. After this date BII's conversion rights on their convertible redeemable preference shareholding ("Preference Shares") will increase materially, from currently one-for-one new ordinary share, to one for 3.0833 (recurring) new ordinary shares. BII is the Company's largest ordinary shareholder and also holds all Preference Shares. The Company has the right to redeem all or part of the Preference Shares at the redemption price, which would give BII a 12% compounded annual return on their investment, subject to a minimum of USD 0.77 per preference share (less dividends received). However, the likelihood of such a repayment by the Company in this financial year, or in the medium term, is currently considered by the Board to be extremely unlikely.

Commenting on these results, Non -Executive Director and previously Interim Chair Ms. Monica Musonda said:

"The past financial year presented numerous challenges, which continued into the first half of the current year. The macroeconomic environment witnessed ongoing deterioration, marked by high levels of inflation and exchange rate volatility. The depreciation of the Kwacha against major foreign currencies and the far-reaching adversities brought about by the El Nino weather event led to escalated costs in critical inputs such as energy, grain and imported inputs thereby putting pressure on margins. The country continues to see a tightened monetary policy to counter inflation and currency depreciation which is further putting pressure on consumer share of wallet."

"Despite these formidable challenges, our management team remained resolute in our strategic objectives. Through concerted efforts focused on revenue maximization, volume growth, and cost management, the Group was able to achieve commendable profitability growth. This performance underscores our resilience in an ever-evolving market and underscores the strength of our vertically integrated business model, which remains pivotal in creating enduring value for our esteemed shareholders."

The Interim Report for the half-year ended 31 March 2024 will shortly today be available on the Group's website.

For further information, please visit www.zambeefplc.com or contact:

www.zambeefplc.com

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.