Zambeef Products PLC Full Year Results (0202U)

TIDMZAM

RNS Number : 0202U

Zambeef Products PLC

30 November 2021

Zambeef Products plc

("Zambeef" or the "Group")

Full-year results for the year ended 30 September 2021

Zambeef (AIM: ZAM), the fully integrated cold chain foods and retail business with operations in Zambia, Nigeria and Ghana, today announces its audited results for the year ended 30 September 2021.

Financial Highlights

 
 Figures in 000's                2021          2020         %        2021        2020        % 
                                  ZMW           ZMW                   USD         USD 
                             ------------  ------------           ----------  ---------- 
 Revenue                       4,974,351     3,875,104     28%      235,528     239,648     -2% 
 Cost of sales                (3,503,635)   (2,659,482)    32%     (165,892)   (164,470)    1% 
 Gross profit                  1,470,716     1,215,622     21%      69,636      75,178      -7% 
 Administrative expenses      (1,150,658)    (945,198)     22%     (54,482)    (58,454)     -7% 
 Distribution costs            (66,848)      (66,770)       0%      (3,165)     (4,129)    -23% 
 Other income                   14,120         6,877       105%       669         425       57% 
 Operating profit               267,330       210,531      27%      12,658      13,020      -3% 
 Finance costs                 (115,282)     (92,322)      25%      (5,458)     (5,709)     -4% 
 Exchange gains/(losses)        23,332       (137,705)     117%      1,105      (8,516)    -113% 
 Share of loss equity 
  accounted investment          (3,358)       (3,177)       6%       (159)       (197)     -19% 
 Profit from assets 
  held for sale                 31,949           -         100%      1,513         -       100% 
 Profit/(loss) before 
  taxation                      203,971      (22,673)     1,000%     9,658      (1,402)    789% 
 Taxation charge               (35,148)      (112,957)     69%      (1,664)     (6,986)     76% 
 Group income for the 
  year from continuing 
  operations                    168,823      (135,630)     224%      7,995      (8,388)    195% 
 Profit from discontinued 
  operations                       -          33,435      -100%        -         2,068     -100% 
 Group income/(loss) 
  for the year                  168,823      (102,195)     265%      7,995      (6,320)    226% 
 
 EBITDA*                        456,771       415,405      10%      21,627      25,689     -16% 
 Gross Profit Margin            29.57%        31.37%                29.57%      31.37% 
 EBITDA* Margin                  9.18%        10.72%                 8.75%       9.08% 
 Debt/Equity (Gearing)          18.59%        21.14%                18.59%      21.14% 
 Debt-To-EBITDA*                 1.56          1.92        -19%      1.97        1.54       28% 
---------------------------  ------------  ------------  -------  ----------  ----------  ------

*EBITDA is defined as Earnings before interest, tax, depreciation, amortisation, fair value adjustments, loss from equity accounted investments, loss on disposal and net unrealised foreign exchange losses.

PERFORMANCE OVERVIEW

Despite the rising input costs and global food prices, the difficult operating environment as a result of the 2020 economic and Covid-19 related uncertainties, the sustained consumer demand for the Groups products has driven positive full year performance. The macroeconomic fundamentals remained relatively stable during the financial year in the context of the previous comparative year. The local currency depreciated at a much slower rate in the first half and experienced steep appreciation in the second half. Increased consumer spending stemming from the Covid-19 economic stimulus package resulted in increased demand for our products. The good rainfall season experienced during the summer increased the supply of hydroelectric power to the nation, which helped alleviate the load shedding situation, thus positively impacting on the financial performance. The strength, resilience and agility of our business can be seen through the strong financial performance.

The Group generated an operating profit, including profit from asset held for sale, of ZMW299.3 million (USD14.1 million) compared to ZMW212.1 million (USD13.1million) in the prior financial year. The operating profit excluding profit from asset held for sale was ZMW267.3million (USD12.7 million) compared to ZMW210.5 million (USD13.0 million) achieved in the previous financial year. Profit before tax was ZMW203.9 million (USD9.7 million) compared to a loss before tax of ZMW22.7 million (USD1.4 million) achieved in the prior financial year. The Group's performance in the face of headwinds illustrates the strengths of its vertically integrated business model, the strength of its brands and management team.

KEY FINANCIAL HIGHLIGHTS

Revenue and gross profit increased by 28% and 21% respectively in Kwacha terms for the Group due to the focus on revenue optimisation across most product lines. However due to the depreciation of the Zambian kwacha, the metrics in USD reduced by 2% and 7% respectively in comparison to 2020.

Despite an inflationary environment, management's continued focus on cost control measures ensured administration and distribution expenses were contained within inflationary levels and only increased by 20% (Inflation averaged 21.7% for the period) from ZMW1 billion in the previous corresponding period to ZMW1.2 billion in the period under review.

Finance costs reduced by 4.4% in USD following repayments of principal amounts on long term loans. During the period under review, management took steps to restructure the Company's debt profile by replacing USD debt with Kwacha debt to match the debt profile to the revenue profile and thus reduce foreign exchange risk, which should help provide predictability to the bottom line going forward. The USD to ZMW debt mix now stands at 15%:85% compared to 80%:20% at the end of the previous financial year. The Group benefited from the Central Bank's Covid-19 relief fund with favourable interest rates.

The operating profit performance and the recorded exchange gains during the financial year resulted in a profit after tax of ZMW169 million (USD 8.0 million) for 2021 compared to a loss after tax of ZMW102 million (USD6.3 million) in the previous period.

Zambeef's management remains committed to implementing the five year business strategy which is underpinned by the following pillars:

-- Focus on and strengthen our core business by investing in capacity and grow market share

-- Divestiture of non-core assets to free up resources

-- Develop a human capital strategy that aligns with business objectives

-- Strengthen our strategic partnerships.

Zambeef's management will continue to focus resources on the Group's profitable business divisions, while improving those divisions that need additional attention to ensure that all areas of the business contribute fully to Group profitability. Management will remain focused on cost control and productivity improvements to enhance margins.

Commenting on these results, Chairman Mr. Mulenga Mundashi said:

"The unprecedented effects of the global pandemic disrupted all aspects of life around the world and our business has not been exempted. This invariably meant difficult trading conditions. Balancing between safeguarding the welfare of our people and customers and ensuring the business continuing to run efficiently and effectively whilst feeding the nation. The 2021 financial year was characterised by supply challenges and rising input costs underpinned by a tough macro environment. In comparison to the previous period, the macroeconomic fundamentals remained relatively stable during the financial year in the context of events in the second half of 2020. The local currency depreciated at a much slower rate in the first half and experienced a steep appreciation in the second half of the financial year. Increased consumer spending, stemming from the Central Bank's Covid-19 economic stimulus package resulted in increased demand for our products."

"The good rainfall season experienced during the summer increased the supply of hydroelectric power to the nation, which helped alleviate the load shedding situation, thus positively impacting on the financial performance. The strength, resilience and agility of our business can be seen through the strong financial performance, having posted record profits."

"The Board believes the key to sustainable growth, while mitigating the effects of dynamic economic and climate cycles, lies in remaining committed to its strategic priorities. As such, the focus remains on the core businesses that generate sustainable and strong cashflows, while reducing our debt to release cash for reinvestment in higher returning projects."

"We anticipate macro-economic stability to continue over the medium term supported by improved investor sentiment, high copper prices and improved electricity supply. The Kwacha is expected to maintain relative stability with minor volatility towards the end of the calendar year. The copper price, which is a major foreign exchange earner for the country, is expected to continue holding as the global economy continues to recover from the Covid-19 related shocks. The inflation rate is expected to reduce following an expected summer crop bumper harvest from a forecasted La Niña weather pattern, the appreciation of the Kwacha and restoration of global supply stability. The Covid-19 pandemic remains a threat to the country as its vaccination program continues to move at a slow pace."

"The Group remains committed to delivering value to shareholders and is well positioned to navigate the turmoil while capitalising on opportunities."

Copies of Zambeef's Annual Report and Accounts for the year ended 30 September 2021 and Notice of AGM will shortly today be available on the Group's website.

 
  For further information, please visit www.zambeefplc.com or 
   contact: 
 
 Zambeef Products plc                                              Tel: +26 (0) 211 369003 
 Walter Roodt, Chief Executive Officer 
 Faith Mukutu, Chief Financial Officer 
 
 finnCap (Nominated Adviser and Broker)                          Tel: +44 (0) 20 7220 0500 
 Ed Frisby/Kate Bannatyne/Tim Harper (Corporate Finance) 
 Tim Redfern/Barney Hayward (ECM) 
 
   Autus Securities Limited                                       Tel: +26 (0) 761 002 002 
 Mataka Nkhoma

About Zambeef Products PLC

Zambeef Products plc is the largest integrated cold chain food products and agribusiness company in Zambia and one of the largest in the region, involved in the primary production, processing, distribution and retailing of beef, chicken, pork, milk, eggs, dairy products, fish, flour and stockfeed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana.

It has 238 retail outlets throughout Zambia and West Africa.

The Company is one of the largest suppliers of beef in Zambia. Five beef abattoirs and three feedlots are located throughout Zambia, with a capacity to slaughter 230,000 cattle a year. It is also one of the largest chicken and egg producers in Zambia, with a capacity of 8.8m broilers and 22.4 million day-old chicks a year. It is one of the largest piggeries, pig abattoirs and pork processing plants in Zambia, with a capacity to slaughter 75,000 pigs a year, while its dairy has a capacity of 120,000 litres per day.

The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 7,787 hectares of row crops under irrigation, which are planted twice a year, and a further 8,694 hectares of rainfed/dry-land crops available for planting each year.

CHAIRMAN'S REVIEW

Dear Shareholder,

It is my great pleasure to present to you the Chairman's Report with respect to the financial year ended 30 September 2021.

The unprecedented effects of the global pandemic disrupted all aspects of life around the world and our business has not been exempted. This invariably meant difficult trading conditions. Balancing between safeguarding the welfare of our people and customers and ensuring the business continuing to run efficiently and effectively whilst feeding the nation. The 2021 financial year was characterised by supply challenges and rising input costs underpinned by a tough macro environment. In comparison to the previous period, the macroeconomic fundamentals remained relatively stable during the financial year in the context of events in the second half of 2020. The local currency depreciated at a much slower rate in the first half and experienced a steep appreciation in the second half of the financial year. Increased consumer spending, stemming from government dismantling of domestic debt and the Central Bank's Covid-19 economic stimulus package resulted in increased demand for our products.

The good rainfall season experienced during the summer increased the supply of hydroelectric power to the nation, which helped alleviate the load shedding situation, thus positively impacting on the financial performance. The strength, resilience and agility of our business can be seen through the strong financial performance, having posted record profits.

The Group generated an operating profit, including profit from asset held for sale, of ZMW299.3 million (USD14.1 million) compared to ZMW212.1 million (USD13.1 million) in the prior financial year. The operating profit excluding profit from asset held for sale operations was ZMW267.3million (USD12.7 million) compared to ZMW210.5 million (USD13.0 million) achieved in the previous financial year. Profit before tax was ZMW203.9 million (USD9.7 million) compared to a loss before tax of ZMW22.7 million (USD1.4 million) achieved in the prior financial year. The Group's performance in the face of headwinds illustrates the strengths of our vertically integrated business model, the strength of our brands and a strong management team.

The Board believes the key to sustainable growth, while mitigating the effects of dynamic economic and climate cycles, lies in remaining committed to its strategic priorities. As such, the focus remains on the core businesses that generate sustainable and strong cashflows, while reducing our debt to release cash for reinvestment in higher returning projects.

The Economic Environment

The Zambian economy came under significant pressure in the first half of the financial year, stemming from the national debt burden, which was exacerbated by the impact of the coronavirus pandemic while the second half saw the country hold successful general elections which resulted in positive market sentiments and a positive economic outlook. The Zambian Kwacha appreciated steeply in the last quarter, supported by foreign participation in the bond market and a higher copper price on the international commodity markets.

Despite recovery in the global economy, the Zambian economic recovery shall remain gradual, given the high debt burden, high inflation and a volatile currency.

Inflationary pressures, particularly food inflation, had resulted in a significant drop in our customers' disposable income and has continued to put pressure on the consumers' share of wallet going towards food spend. Inflation for the financial year under review closed at 22.1% compared to 15.7% for the previous financial year.

Divisional Performance review

Retail and Cold Chain Food Products

The Group continued to focus on revenue optimisation, asset utilisation and cost control as pillars to drive profitability in the combined retail and cold chain food products divisions. Revenue grew by 30% with an operating profit of ZMW 216.4 million.

Supply challenges experienced by the division and rising global food prices precipitated rising input costs. As a result, the division saw volumes decline across most protein categories.

The Poultry business remained a major source of profitable growth for the Group. Management implemented measures to improve production efficiencies, which contributed to improved gross profit margins. Increased demand for eggs, broilers and therefore day-old chicks allowed for revenue growth and improved profitability.

Stockfeed

Volumes were flat compared to prior year during the period owing to slow growth and declines on major product lines. The shortage of day-old chicks on the market limited customers buying of broiler feed while an export ban imposed by government reduced export sales. The increase in the world prices of GMO-free soya beans and imported materials negatively impacted cost of sales and, therefore, profitability.

Cropping

Zambia had a good summer rainfall season, and as a result, yields for the summer crop were in line with expectations, with winter crop yields exceeding expectations supported by better farming practices and reduced load-shedding. The country delivered a bumper maize harvest, which helped to stabilise maize prices.

Outlook

We anticipate macro-economic stability to continue over the medium term supported by improved investor sentiment, high copper prices and improved electricity supply. The Kwacha is expected to maintain relative stability with minor volatility towards the end of the calendar year. The copper price, which is a major foreign exchange earner for the country, is expected to continue holding as the global economy continues to recover from the Covid-19 related shocks. The inflation rate is expected to reduce following an expected summer crop bumper harvest from a forecasted La Niña weather pattern, the appreciation of the Kwacha and restoration of global supply stability. The Covid-19 pandemic remains a threat to the country as the country's vaccination program continues to move at a slow pace.

The Group remains committed to delivering value to shareholders and is well positioned to navigate the turmoil while capitalising on opportunities.

Strategy

During the year, the board embarked on a five-year strategy refresh process for the Group. Although it is difficult to look ahead with any certainty, I am happy to report that we now have a strategy in place that positions the Group to tackle the challenges ahead while capitalising on the opportunities presented and therefore maximise shareholder value. The strategy provides clarity in terms of where we want to go and what we want to do, having set realistic targets and mapped out a journey. The "five-year" strategy will be underpinned by the following pillars:

-- Focus on and strengthen our core business by investing in capacity and grow market share

-- Divestiture of non-core assets to free up resources

-- Develop a human capital strategy that aligns with business objectives

-- Strengthen our strategic partnerships

Acknowledgement

On behalf of the Company and the board of directors, I would like to express my sincere gratitude to Dr Lawrence Sikutwa, Margaret Mudenda, John Rabb, David Osborne and Professor Enala Mwase who resigned from the board in February and March 2021. Their dedication and contributions to the success of the business over the years will be greatly missed.

During the year, we welcomed Monica Musonda, Pearson Gowero and Roman Frenkel to our board of directors. Their industry experience and rich diverse backgrounds will be key in driving the business into the next phase of the Groups evolution as a regional food provider.

At senior management level, we said farewell to Danny Museteka who had been with the company for 22 years, his last role being company secretary. Danny played a vital role in helping to transform the company over the years, and I would like to thank him for his outstanding contribution. We welcomed Mwansa Mutimushi who joined as Group head of legal & company secretary and Nyangu Kayamba who also joined as human resources executive. I believe it is a good addition to the dedicated team and that we have a good balance of skills and professionalism.

I also thank my fellow board members for steering the Group through this challenging period. To our management and staff, I express my gratitude to them for another solid performance, dedicated efforts and resilience in the face of challenges. I am proud of our achievements to date, and I am excited by the potential opportunities upon which we will build our future progress.

Michael Mundashi SC

Chairman

CHIEF EXECUTIVE OFFICER'S REVIEW

Overview

Despite the rising input costs and rising global food prices, and a difficult operating environment resulting from the 2020 economic and Covid-19 pandemic related uncertainties, the positive full year performance has been driven by sustained consumer demand for our products and cost reductions and efficiency improvements especially in the poultry business. The macroeconomic fundamentals remained relatively stable during the financial year in the context of the previous comparative year. The local currency depreciated at a much slower rate in the first half and experienced a steep appreciation in the second half of the financial year. Increased consumer spending stemming from the Covid-19 economic stimulus package resulted in increased demand for our products. The good rainfall season helped alleviate load shedding and therefore positively impacted on the financial performance. The increase in raw material input costs, such as Soya and imported products, impacted on production costs. The resultant increase in food prices to our customers saw increased demand for more affordable offerings of our products as customers traded down.

The load shedding situation improved towards the end of the calendar year 2020 following good regional rains because of the La Niña weather pattern, resulting in reduced generator fuel expenditure and improved production efficiencies.

The Group delivered operating profit, including profit from asset held for sale, of ZMW299.3 million (USD14.1 million), equating to a growth of 42% in Kwacha terms and 8% growth in US Dollar terms, compared with ZMW212.1 million (USD13.1 million) in 2020. The operating profit excluding profit from asset held for sale was ZMW267.3million (USD12.7 million) compared to ZMW210.5 million (USD13.1 million) achieved in the previous financial year.

Our revenue, including from asset held for sale, was ZMW5.2 billion (USD244.1 million) and we achieved a gross profit of ZMW1.54 billion (USD73.1 million), respectively 30.8% and 22.8% above the prior year in Kwacha terms, and 0.5% and 0.1% growth in US Dollar terms, respectively.

The Group's strong performance was driven by growth in the poultry and retail divisions. Management continued optimising top line growth through revenue management initiatives while the continued cost control measures helped deliver strong operating profit performance.

The Group recorded exchange gains owing to the appreciation of the local currency. Financing costs reduced following a reduction in debt and the appreciation of the local currency. Management took steps to restructure the company's debt profile by replacing USD debt with Kwacha debt to match the debt profile to the revenue profile and thus reduce foreign exchange risk, which should help provide predictability to the bottom line going forward. The USD to ZMW debt mix now stands at 15%:85% compared to 80%:20% at the end of the previous financial year. The Group derived a significant benefit from the central bank's Covid-19 relief fund with favourable interest rates.

Our diversified and vertically integrated business with strong brands, supportive partners and an experienced management team helped deliver encouraging results during a challenging year.

Strategic focus

Our strategic focus remains to optimise our asset utilisation and maximise returns. We remain committed to our strategy of focussing on our core businesses, in which we strive to be the best in class. The continued deleveraging and divestiture of non-core assets will enable us to free up cash to invest into our core businesses and therefore maximise shareholder value.

Retail and Cold Chain Food Products (CCFP)

The year saw traditionally high-volume sales lines come under pressure amidst a high inflationary environment and reduced customer spending. Despite high demand in our key product lines, supply constraints negatively impacted volume growth. Revenue growth was mainly driven by pricing on traditional product categories and aided by sales volume growth of traded goods and affordable alternative food categories. Shoprite in-store butcheries were a source of revenue growth as they proved relatively more resilient to inflationary pressures.

Sales volumes came under pressure on the back of supply constraints due to constrained livestock producer profitability levels. Significant producer price increases were necessary during the period for livestock producers to increase output. The price increases that were necessary to stimulate supply resulted in customers moving towards more affordable protein offerings. The poultry division was a major contributor to revenue growth due to improved efficiencies and high demand for it as a relatively affordable protein source, in the form of chicken and eggs.

Despite the challenges, the Retail and Cold Chain Food Products business registered a healthy revenue growth of 30% above the prior year. Management employed a revenue optimisation strategy, responding quickly to the evolving volatile operating environment.

Retail and Cold Chain Food Products delivered an operating profit of ZMW 216.4 million in Kwacha terms. Operational efficiency improvements and overhead spend discipline ensured translation of the top line growth to the bottom-line. Reduced load shedding helped reduce fuel costs of our electricity generators, which further contributed to the increased profitability, particularly in the second quarter.

Stockfeed

Revenue for the division was 31% above prior year mainly due to price, as volumes remained flat on prior year. The demand for poultry feed reduced following a day-old chick supply shortage across the market. An export ban on animal feed from Zambia resulted in a further slowdown of production volumes. However, fish feed continues to register exponential growth following the sector specific lifting of the fish feed export ban and government's efforts to make Zambia a regional player in the aquaculture sector. The depreciation of the Kwacha to the USD and ZAR negatively impacted foreign currency denominated costs. The high soya bean prices also negatively impacted on the cost of sales.

Cropping

Revenue in USD terms increased by 10% due to favourable winter crop price and sale of the soya summer crop. However, operating profit decreased in USD terms due to price increases in input costs. Zambia experienced a good rainfall season and the yield of the summer crop was in line with expectations with the yield of the winter crop exceeding expectations.

Outlook

The macroeconomic environment is expected to remain stable with indicators expected to adjust to a more favourable position. The successful holding of general elections on 12 August 2021 and the resultant change in government and peaceful transition has brought investor confidence and optimism. This triggered a sharp appreciation of the kwacha as foreign interest in government securities intensified and foreign direct investment prospects improve. This coupled with high copper prices, a potential IMF deal and continued low load shedding levels due to another La Niña weather pattern this summer, has improved the country's economic outlook. We expect this to translate into a slowdown in inflation, reduced interest rates and thus increased economic activity and a restoration of macroeconomic stability.

Despite the macro-economic headwinds and uncertainty caused by the Covid-19 pandemic, Zambeef's underlying performance has been and is expected to remain resilient, improving as the economic situation improves. Our strong brands help us maintain customer loyalty while the vertically integrated business model helps to secure both supply and a market for our products. The future recovery in the economy and strong management have positioned us well for an improved profitability in the coming years.

Our deleveraging strategy and debt profile reorganisation will help relieve exchange losses and financing cost pressures to the bottom line, which will increase free cash flow to enable us to invest in the future.

We remain committed to implementing and enforcing Covid-19 protocols in our outlets while driving the vaccination of all our employees. We believe that a healthy, sustainable and profitable growth trend can only be achieved when we work together with our partners, communities and customers to curb infections through the observation and implementation of safety protocols.

 
 Key Market Indicators 
 
 Reporting Period Monthly Averaged            2021    2020   Change 
  Comparatives 
 Economy 
 ROE ZMW/USD            ZMW                   21.1    16.2      30% 
 Annual Inflation 
  rate                  %                     22.1    15.7      41% 
 Copper                 $/Ton                9,041   6,610      37% 
 
 Commodities 
 Maize                  $/ton                  150     252     -40% 
 Soya Beans             $/ton                  400     382       5% 
 SE Cake                $/ton                  416     403       3% 
 Wheat                  $/Ton                  440     415       6% 
 
 Input Prices

 Maize Bran             K/Ton                1,690   1,190      42% 
 Broiler Grower         K/50kg                 367     310      18% 
 Pig Grower             K/50Kg                 317     251      26% 
 Layer feed             K/50kg                 273     231      18% 
 Day-old chick          K/DOC                 11.1     6.8      63% 
 
 Selling Prices 
 Beef Mixed cut         K/Kg                  44.4    37.7      18% 
 Chicken Frozen         K/Kg                  34.6    28.2      23% 
 Chicken Live Market    K/Chicken               80      52      54% 
 Egg Tray               K/tray of 30 Eggs     48.8    35.6      37%

DIVISIONAL PERFORMANCE

Table 1 (ZMW) and Table 2 (USD) below provide a summary of the consolidated performance of the key business divisions reported at an operating profit level.

Table 1: Divisional financial summary in ZMW'000

 
 ZMW                   Revenue                Gross Profit                Overheads             Operating Profit 
                     2021          2020        2021        2020          2021          2020        2021        2020 
 Division         ZMW'000       ZMW'000     ZMW'000     ZMW'000       ZMW'000       ZMW'000     ZMW'000     ZMW'000 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Total 
 Retailing      2,906,466     2,396,313     271,261     243,377     (338,901)     (322,041)    (67,640)    (78,664) 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 CCFP           2,054,232     1,516,371     556,186     401,276     (272,126)     (213,054)     284,060     188,222 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Less 
  Interco     (1,705,769)   (1,399,926) 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Combined 
 Retail 
  &             3,254,929     2,512,758     827,447     644,653     (611,027)     (535,095)     216,420     109,558 
 CCFP 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Stock 
  Feed          1,747,742     1,331,965     300,436     255,888     (153,716)     (129,539)     146,720     126,349 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Cropping         754,385       651,560     272,254     266,405     (192,845)     (160,618)      79,409     105,787 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Others           343,391       203,609      70,579      48,676      (31,985)      (23,450)      38,594      25,226 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Total          6,100,447     4,699,892   1,470,716   1,215,622     (989,573)     (848,702)     481,143     366,920 
===========  ============  ============  ==========  ==========  ============  ============  ==========  ========== 
 Less: 
  Intra/ 
                                         ----------  ----------  ------------  ------------  ----------  ---------- 
 Inter 
  Group       (1,126,096)     (824,788) 
                                         ----------  ----------  ------------  ------------  ----------  ---------- 
 Sales 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Central 
             ------------  ------------  ----------  ---------- 
 Overhead                                                           (213,813)     (156,389)   (213,813)   (156,389) 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ---------- 
 Group 
  Total         4,974,351     3,875,104   1,470,716   1,215,622   (1,203,386)   (1,005,091)   267,330     210,531 
-----------  ------------  ------------  ----------  ----------  ------------  ------------  ----------  ----------

DIVISIONAL PERFORMANCE

Table 2: Divisional financial summary in USD'000

 
 USD                   Revenue            Gross Profit            Overheads         Operating Profit 
                     2021       2020       2021       2020       2021       2020       2021       2020 
 Division         USD'000    USD'000    USD'000    USD'000    USD'000    USD'000    USD'000    USD'000 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total 
 Retailing        137,617    148,195     12,844     15,051   (16,046)   (19,916)    (3,203)    (4,865) 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 CCFP              97,265     93,777     26,335     24,816   (12,885)   (13,176)     13,450     11,640 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Less Interco    (80,766)   (86,576)          -          -          -          -          - 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Combined 
 Retail &         154,116    155,396     39,178     39,867   (28,931)   (33,092)     10,247      6,775 
 CCFP 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Stock Feed        82,753     82,373     14,225     15,825    (7,278)    (8,011)      6,947      7,814 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Cropping          35,719     40,294     12,891     16,475    (9,131)    (9,933)      3,760      6,542 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Others            16,259     12,592      3,342      3,010    (1,514)    (1,450)      1,827      1,560 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Total            288,847    290,655     69,636     75,178   (46,855)   (52,486)     22,781     22,691 
==============  =========  =========  =========  =========  =========  =========  =========  ========= 
 Less: Intra/ 
                                      ---------  ---------  ---------  ---------  ---------  --------- 
 Inter Group     (53,319)   (51,007) 
                                      ---------  ---------  ---------  ---------  ---------  --------- 
 Sales 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Central 
                ---------  ---------  ---------  --------- 
 Overhead                                                    (10,124)    (9,672)   (10,124)    (9,672) 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Group Total      235,528    239,648     69,636     75,178   (56,979)   (62,158)     12,658     13,020 
--------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------

Taking the performance of each of our key business areas in turn:

Retail and Cold Chain Food Products

The combined Retail and Cold Chain Food Products divisions generated an EBIT margin of 6.7% which increased by 229 basis points from the previous financial year to ZMW 216.4 million (2020: ZMW 109.6 million) in Kwacha terms and grew impressively by 51.2% to USD 10.3 million (2020: USD 6.7 million) in Dollar terms.

The strong performance was underpinned by revenue optimisation and cost control in Poultry products supported by increased demand given the relative affordability of Chicken and Egg as a source of protein. Cost pressure arising from supply constraints negatively impacted on the profitability in Pork, Beef and Milk.

West Africa Retail

Our Nigerian business was impacted by the sporadic protests related to the Shoprite announcement of the intention to pull out of the Nigeria market and the End SARS protests. In addition, the business experienced supply challenges across its major product lines. Despite all these challenges, revenue increased by 14% to USD 15.4 million (2020: USD 13.5 million) mainly due to pricing and exchange translational effects with dollar revenue increasing by 14%. However, operating profit declined by 52% in dollar terms due to rising costs of inputs.

Stockfeed

Sales volumes were flat on prior year mainly due to declines on key volume categories. Shortage of day-old chicks slowed the growth of broiler feed while an export ban impacted export sales.

Revenue grew by 31% in Kwacha terms and 0.5% in USD terms, while the operating profit grew by 16% to ZMW 146.7 million (2020: ZMW 126 million) or declined by 11% to USD 6.9 million (2020: USD 7.8 million) in Dollar terms. Production costs was impacted by rising costs of inputs, particularly the Soya and imported raw materials.

Cropping

The Cropping business is key to Zambeef, providing raw material inputs for value added processing within the Group and serving as a currency hedge by being able to generate USD cash flow.

Revenue including revenue from assets heald for sale increased by 10% in USD terms to USD 44.3 million (2020: USD 40.3 million) which translated to a 43.4% growth in revenue to ZMW 935.9 million (2020: ZMW 651.5 million) when analysed in kwacha terms. Gross profit increased by 30% to ZMW 345 million compared to the previous corresponding period (2020: ZMW 266 million) in Kwacha terms despite a 1% reduction in USD terms to USD 16.3 million (2020: USD 16.5 million). The division observed an increase in overheads of 47% in Kwacha terms and 12.7% in USD as a result of increments in repair and maintenance costs during the period under review.

Zambia experienced a good rainfall season and the summer harvest is expected to be in line with expectations. However, the price of maize is expected to be lower than the prior year following the expected bumper harvest predicted for Zambia.

Other businesses

Total revenue from the Group's other business units increased by 68.7%% to ZMW 343 million (2020: ZMW 203.6 million) mainly due to growth in both the milling and leather to shoe businesses. This translated to gross profit growth of 45% in Kwacha terms due to cost pressures in Milling arising from the increase in price of wheat in kwacha terms following the depreciation of the currency.

The leather to shoe business turnaround strategy paid off as the division saw an increase in demand for its products, particularly school shoes, following the opening of schools after Covid-19 related closures. Management focus has been to optimise production efficiencies, control overhead costs, innovation and look for new market opportunities for its products.