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Zambeef Products PLC Annual Report 2014 the Ing Na D Ti E O E N F Zambeef Products PLC Zambeef Products the ing Na d ti e o e n F Annual Report 2014 Zambeef Products PLC Annual Report 2014 Our profile Zambeef Products PLC (“Zambeef”, the “Company”, or, together with its subsidiaries the “Group”) is one of the largest integrated agribusinesses in Zambia. The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed and flour. The Group also has large row cropping operations (principally maize, soya beans and wheat), with approximately 8,350 Ha of row crops under irrigation and 8,650 Ha of rainfed/dryland crops available for planting each year. The Group is also in the process of rolling out its West Africa expansion in Nigeria and Ghana, as well as developing a palm project in Zambia. Strategic Corporate Financial Overview report governance statements Our vision Overview 02 Highlights 03 Challenges Our vision is to be the most accessible 04 Zambeef at a glance and affordable quality protein provider 06 The Zambeef platform in Africa in the region. Strategic report 10 Chairman’s report 14 Joint Chief Executive’s review Our business model Operational and financial review Cropping Edible oils We continue to pursue a vertically Beef Stock feed integrated business model which provides Chicken and egg Pork strong foundations for growth and: Milk and dairy Mill and bakery Leather and shoe – Underpins margin capture and value add. West Africa – Secures supply chain. 24 Environment and social responsibility – Reduces risk and earnings volatility. Corporate governance 30 Corporate governance 34 Board of Directors 36 Report of the Directors 41 Statement of Director’s responsibilities Financial statements 44 Report of the Independent Auditors 45 Statement of Comprehensive Income 46 Consolidated Statement of Changes in Equity 48 Company Statement of Changes in Equity 50 Consolidated Statement of Financial Position 51 Company Statement of Financial Position 52 Consolidated Statement of Cash Flows 53 Company Statement of Cash Flows 54 Notes to the Financial Statements 108 Notice of AGM and Agenda 109 Proxy Form Zambeef Products PLC Annual Report 2014 01 Highlights Revenue Gross profit 7% (USD) 9% (USD) 3% (ZMW) 0.4% (ZMW) 2014: USD279 million 2014: USD94 million 2014: ZMW1,643 million 2014: ZMW555 million Gross profit margin Cost/income ratio Robust cost control 2014 33.8% 2014 26.3% 2013 34.7% 2013 26.6% Excluding depreciation Good operational performance of the traditional core cold chain food Export earnings increased product divisions from USD5.4 million (2011) to USD30.2 million (2014). West Africa revenue and gross profit increased in USD by 23% and 29% respectively in 2014. 02 Zambeef Products PLC Annual Report 2014 Strategic Corporate Financial Overview report governance statements Challenges African Swine Fever outbreak adversely impacted Profit before tax Masterpork during H1 2014 3.6m loss (USD) 21.2m loss (ZMW) 2013: USD4.1 million profit (ZMW21.8 million profit) Gearing 2014 56% 2013 46% Lower than forecast soya prices Depreciating and volatile ZMW adversely impacted gross margin during H1 2014 Zambeef Products PLC Annual Report 2014 03 Zambeef at a glance Robust business model of vertical integration Farming Meat and dairy Key facts Key facts • One of the largest irrigated row cropping operations in Zambia. • One of the largest suppliers of beef in Zambia. • Approximately 8,120 Ha irrigated and approximately 8,480 Ha • Seven beef abattoirs and three feedlots located throughout rainfed, arable, developed land available for planting each year. Zambia with a capacity to slaughter 100,000 cattle p.a. and • Crop production focused on soya beans during summer a capacity to feedlot 24,000 grain fed cattle p.a. and wheat during winter. • One of the largest chicken and egg producers in Zambia • Capacity to produce 40,000 M.T. of soya beans, 45,000 M.T. currently processing 6.2 million chickens p.a. and producing of wheat and 21,000 M.T. of maize p.a. over 46 million eggs p.a. • 125,000 M.T. storage capacity. • One of the largest piggeries, pig abattoir and pork processing plants in Zambia with a capacity to slaughter 100,000 pigs p.a. • Dairy farm with approximately 2,500 dairy cattle, with 850 currently lactating and currently producing over 6.5 million litres of milk p.a. Strategic fit Strategic fit • Farming division provides raw materials input (wheat, soya, • Meat and dairy divisions provide raw materials input for and maize) for further value add processing within the Group. further value add processing within the Group. 04 Zambeef Products PLC Annual Report 2014 Strategic Corporate Financial Overview report governance statements Manufacturing/processing Retail outlets Key facts Key facts • One of the largest edible oil and soya meal producers in • Concessionary Agreement with Shoprite to manage the Zambia with a crushing capacity of 100,000 M.T. of oil seed p.a. Shoprite butcheries throughout Zambia, Nigeria and Ghana. • One of the leading stock feed producers in Zambia, with a • Currently 92 retail outlets, four wholesale centres, seven fast capacity of 13,000 M.T. p.m. food outlets and 22 Shoprite butcheries in Zambia. • Wheat mill with a capacity to mill 30,000 M.T. of wheat p.a. • West Africa provides an exciting opportunity for the Zambeef • One of the largest tanneries in Zambia, with a processing Group, in partnership with Shoprite. capacity of 72,000 hides p.a. • Currently 15 Shoprite butcheries, six self-operated stores and • Meat processing plants with a capacity to process over 700 M.T. two processing plants in West Africa. of processed meats p.m. Strategic fit Strategic Fit • Zamanita adds value to the soya beans from the Zambeef • Vast majority of Zambeef products retailed directly to end farms, producing edible oils and soya meal. consumer, in a value added form, through the Group’s • Stock feed plant adds value to the protein by-product (soya extensive retail and wholesale distribution network. meal) from the Zamanita crushing plant to produce • Zambeef also operates one of the largest transport and stock feed. trucking fleets in Zambia and has its own workshop to • Meat and dairy processing plants add value in producing service and maintain its vehicle fleet. yoghurt, drinking yoghurt, cheese, butter, milk based juices • Gives the Group control over logistics and distribution. and processed meat products. • Wheat mill adds value to the wheat from the Zambeef farms, producing flour. • Tannery and shoe plant adds value to the by-product of the beef abattoir division (cattle hides); producing leather, industrial footwear and protective leather clothing. Zambeef Products PLC Annual Report 2014 05 The Zambeef platform in Africa Zambia – One of the fastest growing economies in Sub-Saharan Africa (“SSA”). – GDP growth averaging >6.5% over last five years and forecast to grow at c.6% over next three years. – Rapidly expanding consumer base, driven by an emerging middle class and high levels of urbanisation. – Current population of c.13.6 million. – One of the world’s fastest growing populations in the world, expected to reach 16 million by 2017. – GDP per capita has increased from USD1,110 (2009) to USD1,487 Operating in some of (2013) and expected to be >USD2,000 by 2017. the fastest growing parts of the world Nigeria – Largest economy in Africa and ranked 26th in the world in terms of GDP. – GDP growth averaging >6% over last three years and expected to average >6.5% over next three years. – GDP per capita doubled from USD1,400 (2000) to USD2,800 (2012). – Africa’s most populous country – population increased from 120 million (2000) to 160 million (2010). – Rapidly expanding consumer base, fuelled by an emerging middle class and high levels of urbanisation. Ghana – One of the fastest growing economies in SSA. – West Africa’s 2nd largest economy after Nigeria and Africa’s 12th largest economy. – GDP growth averaging >6% over the past five years and expected to grow at c.6% over next three years. – Population of 25 million. – Increasing GDP per capita from USD2,900 (2010) to USD3,400 (2013). 06 Zambeef Products PLC Annual Report 2014 Strategic Corporate Financial Overview report governance statements 2 3 1 1. Zambia 2. Nigeria 3. Ghana • 92 retail outlets, 4 wholesale • 11 Shoprite butcheries. • 4 Shoprite butcheries. depots, and 7 Zamchick Inns. • 6 self-operated stores. • 1 processing plant. • 22 Shoprite butcheries. • Farm site housing feedlot, • 9 abattoirs. abattoir, processing plant and • 3 processing plants. coldrooms/freezers. • 5 farms (incl. palm). Zambeef Products PLC Annual Report 2014 07 08 Zambeef Products PLC Annual Report 2014 Strategic report Zambeef Products PLC Annual Report 2014 09 Chairman’s report Integrated business model within a fast growing local economy provides strong foundations for growth Overview (compared with H1 2014) and has also Overall, the year under review has been contributed to an improvement in the challenging. The Group recorded a loss Group’s gross profit margin from 32.7 per before tax of USD3.6 million (ZMW21.2 cent. in H1 2014 to 34.8 per cent. in H2 2014. million). Adjusting for unrealised foreign It is encouraging that the trend from the Dr. Jacob Mwanza exchange losses, this translates to a loss improved second half has continued into Chairman before tax of USD0.3 million (ZMW1.8 million). the current financial year. The 2014 financial year has been a year of In addition, it is pleasing to note that net two very different halves for Zambeef. cash inflow from operating activities was a creditable USD13.8 million (ZMW81.6 million) As previously reported, our performance (2013: USD20.5 million; ZMW108.7 million). during H1 2014 was adversely impacted by macro-economic challenges and external Strategic priorities influences, which included the depreciation Zambeef has an established and proven of the Zambian Kwacha by over 15 per cent.
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