Zambia Sugar posted a net profit of K127.8m in financial year 2013 which was down 9.4% year over year:
Profit from operations declined by 4% year on year, from K316.2 million to K303.2m. Direct and indirect costs excluding salaries and wages were contained within inflation whilst employee costs increased by 12%. Earnings per share declined by 9.6% year over year to K0.39/share.
Revenue grew by 15.9% year over year to K1.78bn:
Revenue growth was driven by local market sugar sales (up 4%), supplies to industrial customers (up 30%) and regional/EU exports (up 5%). However, sales of direct consumption sugar declined by 7% largely as a consequence of strong competition from regional imports, predominantly in the Eastern Province. Exports were adversely impacted by extension of import duty waivers in the Great Lakes Area and a decline in global sugar prices resulting from a surplus on the global market.
Cane yields decreased by an annualized average across the entire harvest area of 6% year over year to 114 tonnes per hectare as a result of irrigation shortfalls in the previous season caused by the failure of the large turbo-alternator set (covered by K20.9m insurance payment) and tough weather conditions during the peak growing months. Cane supply declined by 3%, from 3.25 to 3.15 million tonnes - with small-holder schemes contributing approximately 9%. As a result, total sugar production decreased by 3% year over year to 393,000MT. On a more positive note, refined sugar production increased by 14% year over year to 44,000MT.
This was certainly a mixed set of earnings for financial year 2013 – return on assets declined to 5.7% versus 6.5% the previous despite good revenue growth of 15.9%. Profitability will be affected by further Kwacha depreciation (to the extent that they export and service foreign debt), a surplus of sugar on the global market, recent hike in fuel prices and increased domestic competition from imported sugar (a la Eastern Province) in the next financial year. However, they should be able to make up for it in volume of sales should sugar production reach record levels as expected provided that they also need to keep a lid on their bottom-line – further growth under current market conditions could be more adverse than was felt in 2013.
Trying to decipher this puzzle that is Zambia by using a variety of publicly available data (structured and unstructured) in conjunction with my own skill/experience. * * *