Zambeef locked in discussions to sell edible oils division Zamanita
Zambeef is holding preliminary discussions with a third party about the potential full disposal of 100% owned subsidiary Zamanita. Zamanita is one of the largest edible oil and soya meal producers in the country. It brought in K316 million in revenue (16% of total) in FY 2014, down 14.5% year-over-year. It also had the biggest decrease in gross profit margin among the divisions. But despite the drop in performance, 2015 looks promising because the government announced a significant increase of duty on imported edible oils in the 2015 budget speech and crushing capacity was upgraded to 8,500MT per month.
This is a very interesting move by Zambeef and of course we will find out the reasons behind disposing of this asset should the deal be successful – but we’ll go ahead and speculate as to the motive. They could be looking to use the proceeds of this deal to beef up their core cold chain food product divisions as well as invest more in emerging dairy and West Africa operations. Alternatively, the proceeds could be used to pay down debt (especially $US debt) which saw the company closing 2014 with a high gearing ratio of 56% and significant H1 2014 foreign exchange losses.
It will also be interesting to see which company is looking to purchase Zamanita which will also mean taking on the legal cloud hanging over it. It has an outstanding tax liability of K54.6 million ($8.6M) which was referred to the Revenue Tribunals Authority by Zambeef.
Government set to repay $103M Lap Green loan
Secretary to the Cabinet Rowland Msiska instructed the treasury to secure a $103 million loan from China’s Import and Export Bank (EXIM) with a view to repaying the money on behalf of Lybia’s Lap Green to Chinese firm ZTE. Lap Green had used the funds to invest in Zamtel’s network after acquiring 75% of it in 2010. The deal was reversed in 2012 after late President Michael Sata instituted a commission of inquiry which found irregularities in the $257 million deal. Lap Green then sued the government over the repossession through a UK court (which was seen as neutral because all of Lap Greens senior executives were deported from Zambia).
The government maintains the position that it will not return Zamtel to Lap Green but will compensate it instead. This case will probably end up being settled out of court as this repayment could be seen as an olive branch being extended by the government. Has Zamtel improved over the last few years? In terms of subscriber growth and network infrastructure, not really. They still lag both market leader MTN Zambia and Airtel. It will get even tougher for them if status quo remains as a 4th mobile operator enters the market in the next 2 years.
Illovo Sugar set to build alcohol distillery
Illovo Sugar Ltd (owner of Zambia Sugar) is set to build of an alcohol distillery in Zambia as part of the expansion of its Nakambala factory pending board approval in Q1 2015. This is part of the company’s plan to generate at least 20% of operating profits from downstream sources. Illovo Sugar is listed on the Johannesburg Stock Exchange and is a subsidiary of Associated British Foods plc which holds 51.4% of the issued share capital.
The company is set to stop exports to the European Union (EU) in 2017 as sugar reforms will make it unprofitable for their exports in 2017 and beyond. Zambia sugar exported 138, 000MT in 2013 (35% of production) so this will significantly hurt their earnings. A distillery for potable alcohol as well as planned ethanol plant (for government biofuel blending) could be just what the company needs to diversify its revenue and make up for the negative impact of EU sugar reforms.
MTN Zambia takes court action over promotions ban
MTN Zambia asked for a judicial review of Zambia Information and Communications Technology Authority’s (ZICTA) ban on promotions for all mobile service providers last week. They did this on grounds that the regulator “does not have the powers to do so”.
MTN would not have done this if the ban didn’t affect their earnings so it will be interesting to see how the other two service providers play this – Zamtel is in a bit of a pickle because they are government owned. So who has the power if not ZICTA? That would probably be the Ministry of Transport, Works, Supply and Communication.
Ruling party selects presidential candidate after weeks of dispute
The Patriotic Front (PF) finally selected its presidential candidate after weeks of disputes, squabbles, injunctions – you name it! Justice and Defence Minister Edgar Lungu has taken over as party president and will contest the January 20 presidential by-election on the PF ticket. The former ruling party MMD is yet to resolve their wrangles and still have two party presidents (court decision will be heard on December 10th).
It must said that despite getting the country talking about it, the political wrangles have not led to any sort of bloodshed and Zambia has maintained its reputation as a peaceful nation. In many other countries, political divides usually end up in violence and significant loss of life. Over the coming weeks prior to the elections, Novi Insight will do a breakdown of the presidential race and attempt to project a winner based on previous results as well as variables which traditionally lead to regime change in Zambia.
LME 3 month seller price closed the week at $6,479 per MT
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. * * *