21st Nov 2018 12:39
LONDON (Alliance News) - Zambeef Products PLC on Wednesday reported a sharp rise in annual profit after volumes and gross margins increased in its core Retail & Cold Chain Food division, as the company works towards returning to a dividend payment.
For the financial year ended September 30, Zambeef increased its pretax profit to USD2.9 million from USD572,000 on a 9.6% revenue increase to USD280.3 million from USD256.0 million.
The beef producer with operations in Zambia, Nigeria and Ghana said the rise can be attributed to a 18% profit growth from its Retail & Cold Chain Foods division to USD58.4 million from USD49.4 million.
Zambeef opened 10 new Macro stores in the period, whilst shutting 14 small stores, in an effort to optimise revenue and efficiencies in the division.
The division also saw a return to profitability for the Masterpork and Master Meats units in Nigeria in the last quarter of 2018 following management and operational restructuring.
Zambeef said the performance was "encouraging" given the "significant" increase in overheads.
The company's administrative expenses increased by 13% to USD84.8 million from USD74.8 million.
The Zambian government's move to eliminate subsidies on fuel and electricity, an increase in labour costs and costs from road tolls, licence fees and levies on livestock and crops all contributed to the increased overall group costs.
Zambeef said the economic situation in Zambia remained "relatively stable" for the majority of the financial year but the kwacha - the Zambian currency - suffered "significant depreciation" as conditions weakened amid wider concerns for emerging markets.
"Despite these temporary macro concerns, which are now abating, the new financial year has started well for Zambeef with continued revenue, margin and volume growth. The group expects to continue to grow US dollar earnings in 2019, and generate positive free cash in the financial year," said Chairman Jacob Mwanza.
Zambeef said it remains company policy to return annual dividends, when "cash flow permits".
The company is focused on reducing debt levels, which it believes is an "important prerequisite" to returning to annual payout.
Zambeef's net debt at September 30 was USD56 million, down from USD64 million at the end of the year before.
Mwanza added: "We remain committed to employing Ebitda to fund working capital, capital expenditure for financially viable projects, and to service debt and, as a result, the group does not intend to raise further debt in the near future."
Zambeef said it plans to continue to reduce its debt levels in the medium term, which it hopes will help mitigate foreign exchange and interest rate risk exposures.
Shares in Zambeef were up 0.8% Wednesday at 12.35 pence each.
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