13th Jun 2019 12:00
(Alliance News) - Meat and milk producer Zambeef Products PLC has swung to an annual loss, it said Thursday, as it operates in a "challenging" environment.
Zambeef posted a pretax loss for the six months to March 31 of USD2.5 million, following a pretax profit of USD2.8 million the year before.
Revenue fell 4% to USD118.8 million, but in Zambian kwacha terms, revenue increased 16% to ZMW1.42 billion.
Zambeef's earnings before interest, tax, depreciation, and amortisation margin has declined to 5.8% from 10% a year before, leading to a 46% fall in Ebitda to USD6.8 million.
Since the end of the year, the company said, margins have improved and revenue growth has returned.
"Significant fiscal pressures on the Zambian economy during the period have presented challenges for the market and impacted the disposable income of Zambeef's customers," said Chair Jacob Mwanza.
"Exchange rate movements have not favoured the group in the period and the depreciation of the currency has led to the group reporting realized exchange losses."
"Despite the tough trading conditions, the management team have continued to deliver on the group's key strategic initiatives throughout the period and the second half of the year is expected to see an improvement in both revenue and margin performance," he continued.
Zambian retailing operations registered a 15% rise in revenue to ZMW882 million, or USD66.6 million, helped by increased stockfeed, edible oil, and flour sales. However, disproportionately high sales of lower margin products led to an 8% fall in gross profit to ZMW84 million.
Looking ahead, Mwanza said: "On May 22, the Bank of Zambia increased its Policy Rate by 50 basis points to 10.25% to stem pressure on the kwacha.
"The macro-economic climate is anticipated to remain challenging. However, I am confident the group will perform well in the second six months to September 2019, with continued growth in revenue and gross profit margins."
Shares were down 3.4% in London on Thursday at a price of 7.125 pence each.
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