Zambeef prepares for future growth
Zambeef Products Plc is poised for growth across a number of its divisions as it forges ahead with its goal of becoming one of the leading food producers in the region.
The message came as the company’s annual results for the year to September 30, 2013, were presented to a distinguished gathering of investors, financial analysts, government representatives, traditional leaders and other guests at a breakfast briefing in Lusaka today.
Zambeef, which is listed on both the London and Lusaka stock exchanges , saw revenue rise by 24 percent to K1,595 million during year, with gross profit up by a similar percentage to K553 million.
“It is heartening to see revenues continue to increase at the same time as the directors prepare the business for future growth across a number of divisions.
“A key financial highlight has been to return the business to positive cash generation, which is in line with the strategy set out when Zambeef listed on the AIM market of the London Stock Exchange in June 2011,” said Group Chairman Dr Jacob Mwanza.
Edible oils accounted for the strongest gross profit growth across the company’s divisions, more than doubling during the year to KK49.776 million.
Cropping also saw strong growth, with a 49 percent increase in gross profit to K154 million during the year, while the group’s Novatek stockfeed business was up 21 percent to K48.85 million.
Zambeef also continued its programme of upgrading its retail outlets, with 20 being refurbished during the financial year.
Other highlights including the resumption of crushing at Zamanita’s refurbished edible oils plant, with an increased annual capacity of 100,000 MT.
Crop yields continued to improve across Zambeef’s farms, led by Mpongwe Farm; and joint venture arrangements were put in place with Rainbow to facilitate future expansion of the group’s poultry operations.
Zambeef Chief Executive Officer Francis Grogan said: “The board is committed to unlocking value for its shareholders wherever it can. The deal announced earlier in the year to enter into a partnership with Rainbow involved a disposal to Rainbow of a 49 percent equity interest in Zam Chick. The consideration paid by Rainbow included a profit of K69 million (USD12.8 million), a clear demonstration of the value that has been created in Zam Chick.”
While three out of four of Zambeef’s main divisions – edible oils, cropping and stockfeed – saw strong growth, the company experienced a downturn in sales of perishable products in the final four months of the financial year.
“2013 was a challenging year for Zambeef as the group sought to respond to, and address the consequences arising from concerns surrounding imported beef products together with upward pressure on general overhead expenditure,” said Dr Mwanza.
“The focus on managing controllable costs continues to drive efficiency savings where possible, leaving the business well positioned to target future bottom line growth.”
Billionaire Kumar Birla Champions Regional Supply Chains
As the head of the Aditya Birla Group, a US$46bn firm that operates in 36 countries, Kumar Mangalam Birla is no stranger to splashy strategic moves. Yet his recent announcement that he no longer wants to acquire globally distributed supply chains stood out. While many companies have struggled to cope with shipping backlogs, his firm has chosen to pivot and focus on regional networks. Said Birla: ‘We wouldn’t look at a company or a business where you source in one corner of the world and sell in another’.
He cited protectionism, the pandemic, and the limited movement of products and people around the world as ABG’s primary causes of lost profits. And they aren’t alone. Over the past year, 900 of the U.S. and Europe’s biggest IT, defence, and financial services firms have lost an average of US$184mn apiece.
An Era of Global Disruption
Over the past few decades, low shipping rates and rapid delivery times have lulled multinational firms into a false sense of security. In the early 2000s, companies chose to take on significant global supply chain risks in exchange for increased profits. First, it made sense to manufacture higher-value goods, such as electronics, in low-cost regions throughout Southeast Asia, India, and Africa. Second, first-tier suppliers started to outsource the manufacturing of specific components to second-, third-, and even fourth-tiers—leaving supply chains with extremely limited visibility.
So when COVID-19 disruptions struck certain regions, companies were caught unprepared. Usually, these events come few and far between. But over the past ten years, we’ve seen a number of ‘black swan’ events that have thrown the supply chain industry into chaos. Here’s a quick history of the most significant events in recent years, thanks to the MIT Sloan Management Review:
- 2010. China creates export quotas for rare earth elements.
- 2011. The Tōhoku Earthquake hits East Japan; flooding sweeps throughout Thailand.
- 2016-present. Trade wars between the U.S. and China hurt suppliers.
- 2020-present. COVID-19 pandemic shuts down international shipping ports.
Now, Kumar Birla is one of many who want to re-evaluate how we run our supply chains. Though his company has acquired 40+ companies in the last quarter decade, Birla intends to build up local hubs rather than expand operations.
Why Pursue Regionalisation?
Combine Chinese economic dominance, global supply chain vulnerabilities, and major government policy shifts around the world, and you have a storm brewing on the horizon for big multinational firms. As Brookings noted, ‘the biggest risk for trading opportunities in the developing world is growing protectionism in more advanced economies, often dressed up as national security protection’.
Altogether, from the U.S. to the European Union, governments are trying to protect their domestic supply chains, secure adequate stockpiles of materials, and build world-class local networks. Consider Biden’s recent executive order, which seeks to bring semiconductor manufacturing back to home soil, or Japan’s bid to open more memory chip fabrication factories near Tokyo. The Aditya Birla Group intends to react in kind. Said Birla: ‘We’re looking at regionalism as a very big theme’.
Will Others Follow Suit?
In the post-pandemic economy, global businesses must decide whether to expand or contract. On one hand, the Alibaba Group’s Cainiao Smart Logistics Network recently launched a direct flight between Hong Kong, China, and Lagos, Nigeria. On the other, the Japanese government is desperate to make its chip manufacturing domestic. Indeed, as two supply chain strategies diverge in a post-pandemic world, the one businesses take may make all the difference.
Yet Birla is confident that regionalisation is the right call. According to his words at the Qatar Economic Forum, even necessary cross-border transactions should be smaller in scope. And as the Bloomberg Billionaires Index now lists his net wealth at US$10.4bn, up 52% from 2020, he may have the cash to test his theories out. ‘Regional hubs, regional presence, regional employment, catering to regional demand’, he stated. ‘We’re a global company rooted in local economics’.