Shares in Zambeef tumbled after the Zambia-based
dairy-to-flour group confirmed a return into the red, blaming setbacks from a
hog disease outbreak to increased competition, which has prompted a strategic
Zambeef shares, which are listed in London, plunged 13.5% to
18.9p in morning deals.
The drop followed the group's announcement of a $6.80m after-tax
loss for the October-to-March half, compared with earnings of $6.59m a year
The decline reflected a cocktail of setbacks from the "sudden
and unexpected volatility" in Zambia's currency, the kawacha, to an outbreak in
the country of African swine fever, which forced the shutdown of the group's
pork operation for three months.
Furthermore, "margins have come under pressure from
increased new entrants" into the broader Zambian agriculture and food market.
Revenues fell 8.6% to $140.2m.
However, Zambeef said that it was, in a drive "to address
the domestic challenges being faced the group" seeking to "diversify the
business outside of our core Zambian market".
This involves in part a quest on its own to become a "regional
food player", particularly within the 15 countries, from the Democratic
Republic of Congo to South Africa, which comprise the South Africa Development
Community, with a population of 280m expected to grow by 5% over the next three
"A rapidly expanding consumer base, fuelled by an emerging
middle class, increasing per capita income, rapid population growth and high
levels of urbanisation, present significant and tangible opportunities,"
Zambeef chairman Jacob Mwanza said.
The group is also "actively exploring" further tie-ups "with
global industry players" after the poultry joint venture with South Africa's Rainbow
Zambeef also hinted at the potential for asset disposals,
saying it was investigating ways of "realising some" of the capital gains
revealed by an asset revaluation last year.
Dr Mwanza said: "There is an opportunity for us to unlock
some of this value in order to strengthen our financial position," although
seeing this in the context of "establishing strategic partnerships".
The group's profits decline was led by the beef division,
which continued to suffer a "hangover" from last year's allegations of formaldehyde
tainting in supplies imported by the group, and the edible oils business, both
of which saw drop of 33%.
Edible oil margins were hit by competition from unregulated
imports, which added pressure to margins "that have also been depressed by
exchange rate movements and increased competition".
However, the main earner, the cropping division, saw a more
modest drop of 3.3% to$13.55m in profits, while the dairy business raised
profits by 7.9% to $3.36m, helped by a rise in milk volumes both from its own
operations and those bought in from external suppliers.
"Demand for milk and dairy products remains buoyant and we
have made good progress with improving our yields, herd health conditions and
the number of milking cows," Zambeef said.
'Further price share
In the City, VSA Capital analyst Edward Hugo said that
Zambeef's "renewed strategic focus seems sensible but will take time to
"We expect further price share price weakness into the
second half [of the year] as the macro-issues remain in place."