Zambeef Products PLC (LON: ZAM) have seen their shares in red despite the firm reporting profit gains in an update on Monday.
Zambeef is the largest beef producer in Zambia. The company also provides feedlot services, and manufactures milk, chicken, eggs, leather and shoes. The company operates a fast food restaurant chain and a trucking company, including a fleet of refrigerated trucks
Shares of Zambeef dipped 3.83% to 5p on the positive announcement. 9/12/19 12:45BST.
The firm reported a full year profit rise but Zambian currency headwinds contributed to a mixed revenue picture, in what was a “challenging year” for the Africa-focused food producer.
In the year ended September 30, revenue was up 13% to ZMW3.13 billion from ZMW2.78 billion last year.
In US dollar terms, revenue declined by 9.2% year-on-year to $254.5 million from $280.3 million.
Pretax profit also climbed 38% to ZMW38.7 million from ZMW28.0 million, or by 11% to $3.1 million from $2.9 million last year.
The company operates a chain of 226 retail outlets and it also produces and distributes beef, chicken, pork, dairy, eggs, fish, flour and stockfeed in Zambia, Nigeria and Ghana.
Zambeef said: “The weakening of the Zambian Kwacha against the USD by approximately 24%, increase in the cost of fuel by 19%, together with constrained electricity supply that started in July 2019 due to reduced electricity generation arising from the low water levels in the Kariba Dam, impacted not only the Zambeef group’s performance but also our customers spending power.”
The company added: “The profitability was mainly driven by cropping, increased volumes and margins in the stock feed division and retail and cold chain food products which is in line with our strategic imperative of consistent revenue growth through expansion of our retail network.”
Zembeef concluded: “As we had anticipated, 2019 proved a challenging year for the group, driven by difficult economic and market conditions that impacted negatively on the group’s financial performance, particularly in the first half of the year.
“Set against this challenging macro economic backdrop, the group’s results were reassuring, especially in the second half of the year.”
Looking ahead, the firm expects the tricky market conditions in Zambia, which is mired by a high national debt and electricity supply constraints, to continue hindering consumer confidence.
Shareholders of Zambeef should remain optimistic, as the global state of the supermarket industry has been slow.
Certainly, UK supermarkets have been hit by slow trading and Brexit complications whilst overseas competitors have made gains.
FTSE100 listed Sainsbury’s saw a bruising to its profits in November, as the firm saw underlying profit before tax declined by 15% to £238 million, compared to the £279 million figure recorded for the same period the year prior.
Sainsbury’s did seem to make some ground however, as the firm reported a few days later that it had struck a deal with Australian retailer Coles for a wholesale partnership, as they look to expand wholesale business.
Additionally, Tesco reported a fall in their profits leading to the release of the ClubCard plus and this morning the firm led a consideration to sell its Asian operations.
In the food suppliers market, Associated British Foods saw their shares jump on Friday as the firm gave a confident outlook to shareholders following strong performance from brands such as Primark.
It may be the case that shareholders of Zambeef will have to be patient before they see their shares in green as the global economy looks to recover from a slump which has been caused by both political and economic complications.