Shares in agricultural retail giant Zambeef Products collapsed by as much as 30% in early trading on Wednesday after the company published its financial results for the first half of the year.
The shares fell after it its interim profit was sharply reduced by lower commodity prices and economic slowdown in Zambia.
The year 2017 has got off to a bad start for ZAMBEEF with profits falling from $6.8m to $590,000 for the year to March 31.
However, its headline revenue, which many analysts believe is a better indicator of growth, rose around 20% from $98.8m to $118.4m but gross profit dipped slightly from $39.3m to $38.5m.
This was then compounded by a rise in administrative expenses to USD34.1 million from USD28.6 million.
ZAMBEEF trades both on the London Alternative Market and the Lusaka Securities Exchange.
Zambeef said it was hit by a slowdown in consumer spending in Zambia, after the Bank of Zambia imposed strict monetary control measures in order to combat rising inflation.
Additionally, global soft commodity prices were low during the period.
The company said it maintained its market share “at the cost of short-term profit”.
Zambeef said it expects conditions to improve in the second half of its financial year, with improving economic indicators in Zambia.
However, it said it still expects its full-year results will be “materially below previous market expectations”.
“The principle focus of Zambeef for the foreseeable future will be on expanding our retailing and distribution footprint and on improving margins and restoring profitability. We will continue to expand the Cold Chain Food Production capacity to meet increasing consumer demand, complete the build out of the new stock feed plant at Mpongwe and continue to strengthen our balance sheet, through the disposal of non-core assets,” said Chairman Jacob Mwanza in a statement.
“Rising inflation, Exchange Rate volatility and rapidly increasing interest rates resulted in the Bank of Zambia being forced to introduce strict control measures in order to stabilise the economy. These measures, which included tight control of the money supply and high interest rates, have resulted in a slowdown in consumer spending. However, as a consequence of these Government actions, inflation has reduced to single digit levels, the Kwacha has stabilised and the high interest rates we saw in the first half are starting to abate,” said Dr Mwanza.
He said as a result of these improving economic indicators, and downward price pressure on certain consumer food products, his firm expects the business environment and consumer demand to improve in the second six months of this financial year.
Against this background, Zambeef is well placed to take advantage of the improving macroeconomic conditions.
“While undoubtedly it is disappointing to report this first half performance I have full belief that the second half will see a return to more normal trading conditions and a much improved financial performance,” he said.
In the second half of the year, ZAMBEEF says it expects to see a significant number of key projects and continue to grow its retail network and drive retail sales to help grow its Cold Chain Food Production and stock feed operations.
Dr Mwanza announced that the firm is targeting to commission a new Copperbelt distribution hub which will increase capacity and improve efficiencies in the Copperbelt and North Western Province operations.
It also hopes to complete expansion of breeding farm and hatchery to increase day-old chick production from 210,000 to 310,000 birds per week and expand broiler processing operations to increase production by 30,000 birds per week.
Shares in Zambeef were down 19% at 14.94 pence Tuesday morning.