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LONDON (Alliance News) - Shares in Zambeef Products PLC tumbled Monday after the agri-business group said it swung to a loss in the first half of its financial year, hit by increased competition and currency depreciation.
For the six month to March 31, Zambeef recorded a pretax loss of USD6.5 million, compared to a pretax profit of USD6.4 million the prior year. Revenues in the period fell 9% to USD140.2 million from USD153.4 million a year earlier, while gross margins narrowed to 32.7% from 36.3%.
"Margins have come under pressure from increased new entrants into the market," the company said in a statement.
Zambeef said that, based on current trading, its expects a second-half performance similar to the first half of the year.
"Whilst this has been a challenging six months for the group, we remain confident that the group is sufficiently robust and diversified to weather this period of turbulence. Further, we believe that the positive measures being adopted by the board will serve to strengthen the business model and will underpin an improved performance as we move into the 2015 financial year," Zambeef said.
Zambeef, which has agri-business operations in Zambia, Nigeria and Ghana, said its financial performance in the first half of the year was adversely impacted by macro-economic challenges, increased competition and external events, including a 15% depreciation of the Zambian kwacha against the dollar, inflationary pressure, the outbreak of African swine fever earlier in the year.
"The board is focused on turning the business around, and we are taking decisive action, not only maintaining a tight control of costs but also moving to accelerate our long-term growth strategy to establish Zambeef as a regional food provider," the company added.
Despite the revenue decline, Zambeef said it saw good trading performance from its cropping, milk and dairy, and West Africa divisions. Export sales during the period grew almost 28%, and now represent 15.6% of total revenues.
The company said its two joint ventures with African chicken producer Rainbow Chickens Ltd, Zam Chick and Zamhatch, are progressing smoothly, and it expects to see the full benefits over the next 12 months, when Zamhatch becomes operational.
"We believe that Zambeef is well placed to become a regional food player. With this goal in mind, we are actively looking at forging strategic alliances and partnerships with global industry players, as well as unlocking value from within the group," said Chairman Jacob Mwanza in a statement.
The company said it was encouraged to see a positive net cash inflow before financing of USD4.0 million in the period, up from USD2.0 million the prior year, supported by lower administration costs.
Shares of Zambeef were down 13% at 18.64 pence Monday morning, putting them among the biggest decliners on AIM.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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