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LONDON (Alliance News) - Zambian agri-business Zambeef Products PLC Monday said its sales and profits for the year ended September 30 were hit by allegations that it was importing contaminated beef products, coupled with stock write-off costs and weaker wheat prices.
The food producer issued a profit warning at the end of September in its pre-close trading update, saying its pretax profit would be hit considerably by the contaminated beef allegations, although it expected revenue to be in line with market forecasts.
As a result, the group reported a one-off stock write-off cost of USD1.4 million, as it destroyed its stock of imported beef products, and incurred additional cost pressures such as marketing and advertising costs, as it spent money on rebuilding the company's brand image.
Zambeef reported a pretax profit of USD4.1 million for the year ended September 30, compared with USD3.1 million a year earlier, and a net profit of USD2.6 million, down from a net profit of USD2.9 million the prior year.
The group said that its adjusted pretax profit, which excludes currency exchange movements and a provision of USD9.7 million for its tax assessment, fell to USD6 million, from USD15 million a year earlier.
The food producer said that it has now ceased all further imports of beef products, and will now focus on its core domestic market, which it said will hit its profit margins in the short term, but it expects them to recover in the longer term.
"The issues concerning the group's imported beef products had a considerable impact on our business, and this has been more significant and longer lasting than initially expected, although there have been recent signs that customer confidence is recovering, with sales of products through our retail outlets beginning to improve," said Chief Executive Officer Francis Grogan in a statement.
Zambeef said that a strong performance across its diversified business base was partially offset by increased costs associated with its imported beef division, as well as overheads increasing by 22%.
It reported revenues of USD300.4 million, up 18% from USD255.1 million in revenue a year earlier.
Zambeef said that during the year, it opened three new retail outlets and upgraded over 20 existing outlets. It now has a total of 124 outlets, which includes retail outlets, Shoprite butcheries, wholesale depots, and Zamchick Inns.
During the period, Zambeef also sold a 49% stake in Zam Chick Ltd to Rainbow Chickens Ltd, for USD14.25 million. It said that the proceeds will partly be used to finance its joint venture partnership with Rainbow, called Zamhatch Limited, which is for the development of a hatchery, breeder farm and stock feed plant at its Mpongwe Farm.
Zambeef said it wouldn't pay a dividend for the recent year. "We are hopeful that the business will continue to progress to a stage where it is able to pay dividends and we intend to keep the dividend policy under review with the aim of achieving a balance between providing returns to shareholders and suitable levels of investment in the business", Chairman Jacob Mwanza said in the statement.
Zambeef shares were down 1.5% Monday morning at 33.25 pence per share.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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