Zambrew hinges on high copper prices

 Zambrew hinges on high copper prices
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Lusaka Stock Exchange listed Zambian Breweries (Zambrew) is pinning hope on high copper prices envisioned to boost forex inflows which in turn will strengthen the Zambian  Kwacha ,the company has announced.

In its unaudited results for the six-month period ended 30 June 2021, the beer and soft drink making entity said the projected firming of Kwacha will improve exchange rate thereby reducing cost of importing raw materials and finished goods.

“Zambia has continued to experience steady economic recovery from the economic shock experienced last year due to the unexpected COVID-19 virus that affected a large section of the economy. GDP is projected to grow by 1.8% during the year and to continue this growth trajectory into 2022 and 2023,” said Deborah Bwalya, the Company Secretary in a statement.

“Higher copper prices are expected to boost foreign currency inflow, which should give the kwacha a measure of strength and better the current high exchange rate. Further, commissioning of the new hydroelectricity power station is expected to drastically reduce power supply shortage and possibly eliminate load shedding. For our business, exchange rate improvement will reduce our cost of importing key production raw material inputs as well as finished goods, thereby reducing our operation costs and effectively improve our EBITDA view.”

The company said, strengthening of the currency will safeguard our performance from exchange rate losses and prevent unwanted profit erosion.

Zambrew highlighted that elimination of load shedding will further reduce the need for standby diesel generated energy in plants, which not only reduces costs, but also contributes positively towards commitment of using environmentally friendly energy in line with the global company policy.

“Economic recovery will further sustain the existence of Zambia’s middle class, which creates a fantastic opportunity for our business, particularly in the premium brands segment. Our strong and diversified portfolio of brands remains the consumer’s first choice,” Bwalya said.

During the first half of the year total volume sales grew by 20% above prior year (2020), led by excellent results around the high profit margin ‘core’ and ‘core-plus’ beer segments on the back of a perfectly executed sales mix.

Total revenues grew 46% to ZMW$1,3 billion, largely benefiting from volume growth skewed towards high profit margin brands and customer driven demand.

The business further significantly reduced foreign currency exposure, which resulted in a material year over year total exchange loss saving of 44%, contributing positively to the full operating profit recovery over 2020’s first half year.

“The business recorded a total turnaround in profit before tax, ending the half year 199% above prior year, owing to both strong top-line results as well as implementation of prudent and efficient cost management practices. The business further achieved a full recovery in the critical earnings per share measure during the first half year and anticipates further growth as we move into the peak period,” Bwalya said.

The business remains liquid with a positive cash position of ZMW 144million as at 30 June 2021.

With effect from July 2021, the company appointed Michelle Kilpin as its Country Director ,she  was formerly AB In-Bev Innovation Director – Africa Zone.

The previous country director, Jose D. Moran, who was at the helm of the company for four years was promoted to lead our AB InBev’s operations in Tanzania as Country Director

Fidelity Hamilton Mhlanga

Fidelity Hamilton Mhlanga has been writing finance and business news over the past 5 years. He earned a BSC in Media and Society Studies and Masters of Development Studies from Midlands State University, in Zimbabwe. He follows mining, insurance, banking and energy stories. He is passionate about development and growth.

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