Overview
I am pleased to report that the financial year ended September
2006 has once again been another excellent year for the Zambeef
group. The Annual Report sets out full details of the group's
achievements and financial results but I would like to take this
opportunity to summarise some key highlights over the last
twelve months and our future plans over the next year.
Financial Overview
Turnover increased by 13.8% to K223.8bn and net profit increased
by 17.7% to K19.6bn. Gross margins improved slightly from 43.7%
to 44.9%. The interim and final dividend pay out of K8.5bn for
2006 is 22% higher than last year’s dividend pay out of K7bn.
Since 2000, net profit has increased by 617% in ZMK terms and
500% in US$ terms.
All divisions showed good growth, with notable performances
being recorded in the beef & dairy divisions.
Vision/Strategy
The group's continued success is built around the well-focused
strategy of expanding the business in areas where the group
believes it has a comparative advantage with the aim of being
the leading food provider in the region.
Significant investment has been made into expanding, developing
and improving the standards and efficiencies in all the
divisions. This has reduced the reliance of the company on the
performance of its beef division.
Indeed,
one of the key strengths and successes of Zambeef lies in its
diversification strategy and adding value to all its products,
processes and operations; this complete horizontal and vertical
integration of the business has reduced earnings volatility and
improved the quality of earnings.
Reinvestment / Future Investments
During the financial year under review, Zambeef reinvested in
excess of K19bn into its operations. One of Zambeef's main
strengths has been its significant reinvestment policy since the
company's incorporation.
Over the last twelve months, there has been significant
expansion and development of Zambeef's farming operations, such
that Zambeef is now recognized as one of the largest farming
operations on the African continent, with over 2,700 hectares
under irrigation and another 1,500 hectares of dry land crops.
This has allowed Zambeef to be nearly self-sufficient in its raw
material requirements for its stock-feed plant.
Zambeef is also concluding the construction of its new modern
stock-feed plant, which should be commissioned and fully
operational during the next few months. This will enable Zambeef
to provide the stock feed requirements not only for its own
livestock and poultry divisions, but also to third parties both
within Zambia and the region.
Probably one of the most exciting projects currently being
undertaken by Zambeef is the construction of a wheat mill and
bakery plant, at a projected total cost of US$3m. This is in
line with the group's strategy of adding value to all its
products. The mill and bakery will enable Zambeef to add value
to its wheat, in the form of flour and/or bread, which will be
sold in Zambeef's extensive distribution and retailing network.
This
is an extremely exciting project where Zambeef will be in the
unique situation where it is totally vertically integrated from
the growing of the wheat to the milling and baking and finally
retailing the bread to the end consumer. The efficiencies from
doing the growing, milling and baking all on one farm are
enormous. Zambeef has one of the largest retailing network in
Zambia and we believe that the bread will compliment Zambeef's
other products in the butcheries.
Regional Expansion
In December 2005, Zambeef took the bold step of physically
setting up operations in Nigeria, the second largest economy in
Africa.
Our Nigerian subsidiary’s performance over the last nine months
since inception has been impressive with turnover increasing by
over 130% and the company recording a healthy profit. This is
set to continue and grow as we join Shoprite in their further
expansion plans in Nigeria. We also intend to commission a meat
processing plant over the next few months. This will allow us to
produce & sell value added meat products, of which there is a
huge demand.
Brand
Zambeef's brand, both as a corporate and for its individual
products, continues to go from strength to strength and is fast
becoming a leading brand not only within Zambia and the region
but also in other parts of the world where Zambeef trades in.
Corporate
Governance
A detailed report on corporate governance is contained in this
annual report, suffice to say that the directors and senior
management of Zambeef are fully committed to the principles of
effective corporate governance and the application of high
ethical standards in the conduct of business. The group endorses
the principles of openness, integrity and accountability as set
out in the King Report on Corporate Governance SA 2002 and in
the group's Code of Corporate Governance, which was updated by
the Audit Committee and approved by Board in November 2006.
Board of Directors
Zambeef's Board consists of 12 directors; of whom 8 are
independent non-executive directors appointed by the
shareholders and four are executive directors. During the year,
two members of senior management were nominated to the Board -
Yusuf Koya as Executive Director and Nancy Hart as Finance
Director.
It is my considered view that the mix of technical,
entrepreneurial, financial and business skills and experiences
of the Board of Directors is well balanced, which has enhanced
the effectiveness of the Board.
Environmental & Social Responsibility
Given our economic and social influence in so many parts of
Zambia, we are constantly examining how we can best contribute
to the communities in which we operate. In the past year, we've
formalized our approach by establishing a sustainable
development framework consisting of environmental and social
priorities and policies, which are aimed at providing a safe and
healthy work place, protecting the environment, and being a
responsible corporate citizen within the communities where we
operate.
Aside from the many prizes and awards Zambeef wins at many
trade, agricultural and commercial shows/fairs, I was
particularly proud of the “Community Empowerment True Ebony
Achievement Award” which Zambeef won in August 2006. These
awards are aimed at singling out outstanding individuals or
companies that contribute to the sustainable development of the
Zambian community.
Appreciation
As
Chairman of the company, I would like to express my gratitude
for the support I have received from my colleagues on the Board
as well as members of Zambeef's senior management.
On behalf of the Board, I would like to pay tribute to our
thousands of employees for their loyalty, enthusiasm and team
spirit, which has ensured another very successful year for
Zambeef.
JACOB MWANZA -
CHAIRMAN
