Final Results

RNS Number : 8482S

Zambeef Products PLC

28 November 2011

For Immediate Release

28 November 2011

Zambeef Products plc

("Zambeef" or the "Group")

Results for the year ended 30 September 2011

"Strong performance aided by the growth of the Zambian economy"

Zambeef (AIM: ZAM), the fully integrated agri-business with operations in Zambia, Nigeria and Ghana, is pleased to announce its results for the year ended 30 September 2011.

In June of this year, the Group raised approximately US$54.97 million by way of both a rights issue of new ordinary shares to existing investors via the Lusaka Stock Exchange ("LuSE") (the "Rights Issue"), at K2,975 per share and a placing of new ordinary shares to institutional investors on admission to AIM (the "Placing") at 38.06p per share.

Financial Highlights

Year Ended 30 September 2011	2011 US$m	2010 US$m	% Change
Revenue	206.8	161.9	28
Operating Profit	14.8	7.1	108
Profit Before Tax	10.6	3.3	225
Earnings Per Share	5.10 (cents)	2.62 (cents)	95
Proposed Dividend (to be approved by shareholders at AGM)	0.45 (cents)	1.04 (cents)	(26)

Operational Highlights

· Growth in revenue of 28 per cent. across the business

· Gross margins improved from 31.4% (2010) to 34.1% (2011)

· Profit after tax up 125% to US$9.4million

· Acquisition of Mpongwe farms in Zambia for US$46million consisting of 46,876 Ha (of which 2,994 Ha is irrigated and 7,667 Ha is rainfed land))

o Increases capacity to produce soya beans in a soya bean deficient region for throughput to the growing and high margin edible oils division, Zamanita Ltd.

o Zambeef now owns total hectarage of 8,000 Ha of irrigated and 9,000 Ha of rainfed arable, developed land

· Dramatic turnaround in performance of Zamanita Ltd. with gross profit increasing 73 per cent. to US$13.1million

· Expansion and upgrade of Zambian retail network; seven new retail outlets opened, eight existing retail outlets refurbished and first two wholesale stores established

· Continued expansion in West Africa in partnership with Shoprite with gross profits of West African operations increasing by 54 per cent. to US$2.4million

o Further development of our leased land in Nigeria to supply Shoprite's increasing footprint in the area

o Currently 4 Zambeef own stores in Nigeria

o Currently 3 outlets in Shoprite stores in Nigeria; 2 in Ghana

o Commencement of stock feed exports to Zimbabwe which, during the year, totaled over 3,000 MT

Commenting on the results, Chairman Dr. Jacob Mwanza, said:

"We are delighted to report a strong performance of our business, aided by continued growth of the Zambian economy, a higher level of disposable income among our customers, stability of the Zambian Kwacha and single digit inflation. We have a strong infrastructure in place and we believe that, combined with our vertically integrated business model, this will enable us to realise our objective of becoming the leading food provider in both Zambia and the surrounding region."

For further information, please contact:

Zambeef Products plc
Francis Grogan, Chief Executive Officer	Tel: +260 (0) 9 7799 9001
Yusuf Koya, Executive Director	Tel: +260 (0) 9 7799 9100

Strand Hanson Limited	Tel: +44 (0) 20 7409 3494
Angela Peace James Spinney

Buchanan Mark Edwards Christian Goodbody	Tel: +44 (0) 20 7466 5000

Notes to Editors

The Zambeef Group is one of the largest integrated agri-businesses in Zambia, involved in the primary production, processing, distribution and retailing of beef, chickens, pork, milk, eggs, dairy products, fish, flour, bread, edible oils and stock feed, throughout Zambia and the surrounding region, as well as Nigeria and Ghana. The Group is also one of the largest cereal row cropping operations in Zambia, with approximately 8,000 Ha of irrigated land and approximately 9,000 Ha of dry land, available for planting each year. The Group has approximately 4,750 employees.

Further information can be found on www.zambeefplc.com

Chairman's Report

Performance Review

I am pleased to report that the financial year ended 30 September 2011 has seen the Zambeef Group report a strong operating performance aided by continued growth of the Zambian economy, higher disposable income among its customers, stability of the Zambian Kwacha, single digit inflation, stable commodity prices, and continued synergies being achieved within the Group.

Trading conditions over the financial year have continued to improve, with demand for all product lines increasing and most divisions of the Group showing higher figures both in turnover and gross profitability. This has enabled us to open seven new retail outlets and two wholesale depots, as well as refurbishing another eight retail outlets in Zambia; all of which are performing very well.

Zambia also saw a peaceful transition of power and president during the September 2011 national elections which is a proud testament to Zambia's political stability and maturing multi-party democracy.

Turnover increased by 28 per cent. to ZMK983 billion (USD207 million) and Group profit for the year increased by 132 per cent. to ZMK45 billion (USD9.4 million).

The Group continues its cash generating trend, with EBITDA significantly up by 44 per cent. to ZMK88 billion (USD18.6 million).

Despite the above, the global economy continues to be volatile with minimal growth in the USA and European economies leading to volatility in share indices and potential volatility in commodity prices, which could present the Group with challenges in the future.

Purchase of the Mpongwe Farm Assets

During the year, we successfully completed the purchase of the Mpongwe Farms. This is an extremely exciting opportunity for us to harness Mpongwe's vast cropping operations for cereal row crop production.

This acquisition is in line with Zambeef's objective of growing, expanding and diversifying the business with the aim of becoming the leading food provider in Zambia and the surrounding region.

AIM IPO and Placing and LuSE Rights Issue

During the year, the Company undertook a rights issue on the LuSE and a placing and admission to the AIM Market of the London Stock Exchange. Having successfully concluded the rights issue and placing, a total of approximately USD54.97 million was raised with the issued share capital increasing from 158,706,045 ordinary shares to 247,978,195 ordinary shares and a market capitalisation of approximately ZMK772 billion (USD160.9 million) as at 30 September 2011.

The funds raised were utilised to complete the acquisition of the Mpongwe assets, to pay for costs related to the fundraising, and to commence the expansion and upgrade of the Mpongwe assets.

The dual listing will aid in facilitating future fundraises for further development and growth, assist in maintaining the high standards of transparency and corporate governance, as well as enhancing the Group's reputation, profile and financial standing with its key partners, suppliers and potential vendors of attractive assets. I am delighted by the warm reception that our admission to AIM received and the keen investor interest in Zambeef and believe that this will complement our existing listing in Lusaka.

Human Capital

The Group continues to be a large employer in Zambia, employing an average of 4,367 employees per month with a monthly wage bill of approximately ZMK9 billion (USD1.9 million). Zambeef continues to attract and retain its workforce through good staff welfare and working conditions while maintaining strong relationships and communication with the Labour Union.

Board of Directors

As part of the continued evolution of the Group and listing on AIM, we are pleased with our current Board of Directors which is composed of six Non-Executive Directors and four Executive Directors. Rodney Clyde-Anderson and Hilary Duckworth have retired from their positions and I would like to take this opportunity to extend my appreciation and gratitude to them for their excellent contribution and support during their time with the Company.

As the Chairman, I would also like to take this opportunity to express my gratitude for the strategic support I have continued to receive from my co-directors and senior management during a year when Zambeef continued to make great progress in its mission to become a leading food provider.

Dividend and Outlook

The Board of Directors is recommending a final dividend of ZMK21.40 (0.45 cents) per ordinary share, in addition to the interim dividend paid out of ZMK15 (0.32 cents) per ordinary share, to be paid on or before 29 February 2012.

Growth in our core areas is expected to be in line with the continued growth of the Zambian economy. Following a positive turnaround in Zamanita's performance, our edible oils division, we expect this division to continue to be one of our key growth drivers, buoyed by additional throughput of soya beans from the increased farming area of the Mpongwe Farm and proposed upgrade work thatis detailed in the Operational Report. Our West African expansion is expected to gather momentum with additional Shoprite stores due to open in Nigeria and Ghana, and we continue to expand our domestic retail network.

We believe we have a strong infrastructure and business model in place which should enable us to realise our objective of becoming the leading food provider in both Zambia and the surrounding region.

Dr. Jacob Mwanza

Chairman

November 2011

Chief Executive Officer's Report

Introduction

On the back of an improving Zambian economy, I am pleased to report on a year that saw Zambeef make positive operational and financial progress. We produce, process, distribute and retail beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed, flour and bread. During the year we have shown increased turnover and gross profitability for the majority of our divisions, by an average of 28 per cent. and 38 per cent. respectively. Trading conditions in Zambia continue to improve, supported by growth in the economy at a steady 7 per cent., single digit inflation, stability of the Zambian Kwacha relative to the US Dollar, stable commodity prices and a higher level of disposable income among our customers.

During the year we completed a successful IPO, a placing on AIM and a successful rights issue on the LuSE, raising in aggregate ZMK263 billion (USD54.97 million). The majority of the proceeds were used to expand our primary production cropping operations through the purchase of the Mpongwe Farms. This is in line with our objective of becoming the leading protein provider in the region, which we will achieve through a vertically integrated model ("farm to fork"). This strategy significantly reduces the Group's risk profile, by allowing it to supply its own processing divisions with the required raw materials, and to sell the finished products directly to the end consumer through its extensive retail network.

The purchase of the Mpongwe Farms, which consist of 46,876 Ha, increased our farming area by 2,994 Ha of irrigated land and 7,667 Ha of rain-fed available to plant, taking the Group's total owned farming land to 8,000 Ha of irrigated land and 9,000 Ha of rain-fed land. The Board considers the the Mpongwe Farms to be some of the best farming lands in Zambia, ownership of which will enable us to increase our production of soya beans for throughput to Zamanita (our edible oils division), and wheat for throughput to our milling and bakery division, as well as for external sale. The entire region is currently deficient in soya beans, and this acquisition seeks to address the Group's exposure to that deficiency. Crushing soya beans produces oil, which is sold at a higher margin than the sale of imported palm oil, whilst also producing feedcake to supply both our internal stock feed division, and external third parties. With a sufficient supply of soya beans we expect Zamanita, which increased turnover by 17 per cent. this year, to become even more important to the Group.

The additional irrigation will allow us to obtain higher yields of soya and additional wheat crop. All of our livestock divisions have increased their revenues over the year, and the quality of our livestock is improving with the quality of our stock feed. The new stock feed plant, commissioned during 2010, has allowed us to become one of the leading stock feed suppliers in Zambia, and also to commence exports to Zimbabwe.

Our protein divisions have performed well, as the national average of disposable income has grown together with demand for protein. Despite supply issues in the beef sector (due to a scarcity of standard cattle), with eight beef abattoirs strategically located around the country, we are in a unique position to gain access to cattle suppliers. As a result of this shortage, we expect consumer demand for chicken to continue growing, and have constructed additional poultry houses in anticipation of this. Demand for cheaper sources of protein, such as eggs and fish, continues to increase, and we have improved revenues in both areas. Demand for pork has also increased significantly, and improvements to our piggery during the year resulted in an increased number of births as well as fewer premature mortalities. This division has reported excellent growth. In the current economic climate there is low demand for leather products, nevertheless our tannery and shoe plant division has increased its contribution to Group profitability.

Our retailing operations continue to expand, and we started 2011 with a strong commitment to increasing our distribution and retail network, in order to gain further market penetration. We are delighted to have opened seven new retail outlets, refurbished a further eight self-operated outlets and established our first wholesale stores in Lusaka and Kitwe (taking our total number of outlets to 117). We continue to partner with Shoprite, Africa's largest food retailer, and we are operating in 20 Shoprite stores across Zambia.

West Africa continues to be an exciting growth prospect, and we have grown our presence in West Africa during the year in partnership with Shoprite, operating additional butcheries in Enugu, (Nigeria), and through increasing our self-operated stores. In Ghana we operate two Shoprite stores. In Nigeria we operate four self-operated stores, and three Shoprite stores and supply Shoprite and our outlets from our feedlot operations in Abeokuta and our processing operations in Lagos. Shoprite is planning to increase its footprint in Nigeria and Ghana with a planned opening of five new additional stores over the next twenty four months.

Our People

Zambeef is one of the most vertically integrated operations in Zambia. With this comes the requirement to ensure that we have appropriate staffing in all divisions and to achieve seamless movement of primary commodity to processing, distribution and retail of edible food. Our staff add exceptional value and are a proud testament to Zambeef being one of the leading enterprises in Zambia.

As such, I would like to take this opportunity to sincerely thank all staff working for the Zambeef Group in Zambia, Nigeria and Ghana, for their continued dedication to the business and for their contribution to Zambeef's success during the year. The Board of Directors and I will strive to ensure that all employees enjoy continuing staff welfare and that we become one of the leading employers in the region.

Outlook

New projects approved by the Board, which are to be undertaken over the next two to three years, include the upgrade and expansion of the Mpongwe Farms, the renewal of some of the farming infrastructure, the continued upgrade and expansion of Zamanita's processing facilities, the upgrade of Master Pork's processing facilities, the expansion of our stock feed capacity and product lines, the upgrade and expansion of our dairy plant and additional layer and broiler operations, the upgrade and expansion of the chicken abattoir, the establishment of a new pig abattoir in the Copperbelt province, and the continued expansion of our retail infrastructure across Zambia and West Africa and the provision of capital to Zampalm to complete the pilot phase of 4,000 Ha of palm plantation.

I am excited about Zambeef's future. We have achieved a number of milestones this year which include the successful domestic rights issue, the dual listing on AIM, and the acquisition of the Mpongwe Farms. We have made great improvements to the majority of our core activities. We have expanded our retail network and further extended our activities in West Africa. Shoprite's anticipated rollout of stores in West Africa over the coming 18-24 months is an exciting prospect and we look forward to harnessing further growth in this region.

It is expected that Africa will continue to contribute more to global agricultural output. I believe Zambeef has a bright future and it is a privilege to be Zambeef's Chief Executive. I believe we have a balanced business with a strong asset portfolio, high quality employees, and a sound balance sheet. Our integrated business model and strategy puts us in a unique position to take advantage of the growing demand for food in Zambia and the surrounding region.

Francis Grogan

Chief Executive Officer November 2011

Operating Review

This year has seen most segments within the Zambeef Group exhibiting good growth and improved margins. These segments are discussed in more detail below:

ZAMBEEF

Beef

The beef division is one of the largest divisions in Zambeef contributing 23 per cent. of Group turnover and 24 per cent. of gross profitability.

Turnover of this division increased by 38 per cent. and gross profitability increased by 26 per cent., while gross margins declined from 31 per cent. in 2010 to 29 per cent. in 2011.

The beef division has had supply problems due to a scarcity of standard cattle in the market. Due to the continued bumper harvests of maize, small scale farmers, whom are the main source of standard cattle, have been reluctant sellers. As a result, the total amount of standard cattle sourced during the year has reduced by over 7,000 head of cattle.

The demand for choice cattle (premium beef) continues to grow. As such, the Group purchased over 17,000 animals from commercial farmers (2010:15,500). We will continue sourcing more choice cattle for supply to the market. During the year, we improved our feedlotting operations by opening a third feedlot in Mongu allowing us to source additional animals. We also opened a new abattoir in Mumbwa, allowing us to obtain a new avenue for animals.

Due to the lack of supply in the market, and the continuing increase in demand for beef products, the price of beef has increased by 22 per cent. In spite of the volume reduction of locally sourced cattle, the Group has sustained market growth in demand, aiding turnover growth through importations of key value items such as liver and kidney.

Although we expect the beef sector to continue to have supply issues in the short to medium term, Zambeef remains in a unique position within the beef industry with eight abattoirs and three feedlots strategically located around the country in order to gain access to cattle.

ZAMCHICK and ZAMCHICK EGG

Chicken

This division contributed nine per cent. of Group turnover and eight per cent. of gross profitability.

Both turnover and gross profitability have increased by 27 per cent. while maintaining margins at 25 per cent.

Margins in the chicken segment have been affected by increased feed prices and higher costs of purchase from an increased external supply of chickens due to demand from consumers increasing and insufficient supply from within Zambeef broiler houses. Additional poultry houses have been set up which will provide us with 360,000 additional broilers.

The total volume of chickens produced for sale increased by 21 per cent., internal chicken production increased by 46 per cent., and external supply of chickens increased by 11 per cent. In line with increased demand, the Group increased prices by six per cent.

With standard beef supply remaining an issue nationally, it is expected that chickens will be in high demand as a substitute protein. As a result the Group will be increasing its broiler houses in anticipation of this increase in demand.

Eggs

This division contributed two per cent. of Group turnover and three per cent. of gross profitability.

Turnover of this division increased by 58 per cent. and gross profitability has remained constant. Gross margins have declined from 49 per cent. in 2010 to 47 per cent. in 2011.

The volume of eggs produced increased by six per cent., in line with recent year on year trends. This has been achieved by increasing the production per layer bird, through an improved variety of birds, which have resulted in a lower requirement for birds to meet production demands. In 2011, the Group had an average number of 131,244 layer birds (2010: 145,169).

However, egg prices declined during the year. Zambia's total production of eggs is thought to generate a surplus versus domestic demand, which leads to a large volume of exports to neighbouring countries such as the Democratic Republic of the Congo and Tanzania. This year Zambia experienced lower exports to these markets which led to an increased supply of eggs in the local market resulting in reduced prices.

Supply issues have now been normalised with export markets reopening and there is currently a shortage of egg supply within Zambia. As a result, the Group will be increasing its layer houses to cater for this demand growth.

MASTER PORK

Pork

This division contributes seven per cent. of Group turnover and eight per cent. of gross profitability.

Turnover of this division increased by 31 per cent. and gross profitability has increased by 29 per cent. while gross margins have remained consistent at 31 per cent.

Demand for pork has risen dramatically during the year and the pork division has had another excellent year.

The piggery continues to improve its performance with increased number of births and fewer mortalities, due to improved animal husbandry and increased number of pigs supplied. This has led to the total number of animals increasing during the year to 4,302 (2010: 3,691).

We have expanded production space at Master Pork in order to house additional processing machinery (purchased during the year for a cost of ZMK 5 billion (USD 1.1 million)) enabling us to increase production volumes and efficiency.

With pork becoming an increasingly important protein product in Zambia, and demand for processed meat products increasing, it is vital to continue the expansion of our facilities. We are introducing the Hirschpro 400 plant, a unique automated processed meat manufacturing unit capable of increasing production capacity and efficiency significantly, the first of its kind in Africa outside South Africa.

ZAMMILK

Dairy

This division contributes four per cent. of Group turnover and 10 per cent. of gross profitability.

Turnover of this division increased by 22 per cent. and gross profitability has increased by 19 per cent. while gross margins have marginally declined from 65 per cent. in 2010 to 64 per cent. in 2011.

One of the leading contributors to increased turnover and contribution was the sales mix of milk (47 per cent.) to non-milk, (53 per cent.) (2010: 54 per cent. to 46 per cent.) products, a such as yogurt and milk based juices, the latter being high value products. However, the margins have declined during the year due to increased external party purchases at a higher cost than internally produced milk, which has been necessary to meet demand.

Total milk processed during the year increased by nine per cent. as a result of increased output from the Group's dairy farm and increase in external purchases.

This division continues to be the highest gross margin earner. With increased demand from the consumers, there are approved plans to upgrade and expand the production capacity at the milk processing plant.

ZAMBEEF FARMING

Cropping

This division contributes nine per cent. of Group turnover and 12 per cent. of gross profitability.

Zambeef's row cropping operations (maize, soya beans and wheat) have had a satisfactory year with turnover up 79 per cent. and gross profits up 28 per cent., but with gross margins declining from 39 per cent. in 2010 to 28 per cent. in 2011. This excludes the performance of the recently acquired Mpongwe Farm in June 2011.

With Mpongwe Farm included, this division recorded an increase in turnover of 94 per cent., an increase in gross profitability of 86 per cent., and a gross margin of 37 per cent.

Zambeef's 2011 summer crop was soya bean intensive in order to provide Zamanita, the Group's edible oils division, with increased throughput. However, soya bean yields were affected due to poor germination of seed and adverse weather conditions. As a result gross profit margin was affected, although the high market price of soya in 2011 led to increased turnover.

Summer maize was only planted at Huntley Farm as, at current prices, this crop is not profitable. As such, maize was only planted for crop rotation purposes.

The winter crop was made up of predominantly wheatgerm. Improved management and better farming practices have led to improved wheat yields. With current wheat prices we expect winter cropping to be the most profitable segment of our farming division going forward. Wheat production is forecast to generate a surplus to the Group's internal requirements and approximately 25,000 MT should be available for sale to third parties.

Mpongwe Farm

During the year, Zambeef acquired Mpongwe Farm. The Directors believe that with the well drained soils, abundant water supply in the area, and consistent climatic conditions, which has resulted in the farm achieving historically high yields, there is opportunity to significantly increase Zambeef's production of row crops.

Critical to Zamanita, our edible oils and animal feedcake division, is the availability of soya beans, which are crushed to produce edible oil and the by-product, feedcake, is used to produce animal feedstock. Prior to the acquisition of Mpongwe, the Group only had capacity to produce up to 10,000 MT of soya beans and relied on the open market for the supply of the balance of 40,000 MT.

This has been challenging as the region is soya bean deficient. With the Mpongwe Farm included within Zambeef's portfolio, the Group will now have capacity to internally produce up to 40,000 MT of soya beans and will be less reliant on external supply. It is expected that this will make the Group significantly less exposed to commodity price fluctuations with regard to inputs, whilst allowing the Group to benefit from any price increases when it comes to sell its finished products.

2012 will see the full benefit of the acquisition of Mpongwe Farm with soya beans and maize production during the summer cropping season, and wheat production during the winter cropping season.

Palm

Zambeef has title to 20,000 Ha of land for development of its palm plantation. The pilot phase of 4,000 Ha is underway with ZMK12.3 billion (USD2.6 million) spent in the financial year.

Zambia and the region remain a major importer of vegetable oils and the Group is currently a large importer of palm oil from the Far East for its edible oils division. Once yields of palm fruit commence, it will allow us to substitute imported palm oil, thereby improving margins through an extension of primary commodity production and processing.

NOVATEK

Stock Feed

This division contributes 11 per cent. of Group turnover and eight per cent. of gross profitability.

Turnover of this division increased by 65 per cent. and gross profitability has increased by 67 per cent. while gross margins have marginally increased from 21 per cent. in 2010 to 22 per cent. in 2011.

Zambeef's new stock feed plant commenced op-erations in 2010. The stock feed plant was commis-sioned not only to supply Zambeef's internal animal feed requirements but also to generate third party sales both in Zambia as well as providing expert op-portunities to markets such as Zimbabwe. On an av-erage monthly basis, Zambeef's internal require-ments have risen by over 14 per cent. versus 2010, external sales excluding exports have increased by over 76 per cent., while exports have risen by over 120 per cent. over the same period. The latter in-cludes exports to Zimbabwe, which have increased to over 3,000 MT (2010: 60 MT). Zambeef's internal consumption of total stock feed produced was 38 per cent. during the year.

The stock feed plant is currently running at close to full capacity and with increased third party sales, Zambeef has become one of the leading stock feed suppliers in Zambia. Management is reviewing the upgrade and expansion of the stock feed operations in order to increase capacity and profitability of this division going forward.

ZAMFLOUR & ZAMLOAF

Milling & Bakery

This division contributed six per cent. of Group turnover and three per cent. of gross profitability.

This division has had a challenging year. Whilst turnover increased by 48 per cent., gross profit decreased by 16 per cent. and gross margin has declined from 23 per cent. in 2010 to 13 per cent. in 2011. This has been as a direct result of increased wheat prices. Therefore, despite increasing volumes of flour production by 49 per cent. and price increases of eight per cent., the increased price of wheat by 31 per cent. has reduced the total gross margin and gross profitability of the division. With a growing middle class, the domestic demand for flour and bread continues to rise, and we anticipate benefiting from this consumer demand.

ZAMLEATHER & ZAMSHU

Tannery and Shoe Manufacturing

This division contributed one per cent. of Group turnover and one per cent. of gross profitability.

Turnover of this division increased by 12 per cent. and gross profitability has decreased by eight per cent. while gross margins have decreased from 35 per cent. in 2010 to 29 per cent. in 2011.

In spite of a five per cent. reduction in the total number of hides processed during 2011 versus 2010, turnover has increased during the year. This was achieved through an increase in the sales price per square foot.

The global leather industry continues to suffer from low demand with leather being a luxury item. There has been limited recovery in wet blue exports. As a result the Group refocused its efforts more on finished leather and shoe production for sale in the domestic and regional markets. This resulted in an increase in the volume of finished leather sales by 12 per cent. However, due to competitiveness in the region, prices were reduced by five per cent. in order to gain a larger market share. Similarly shoe sales increased by 23 per cent. in volume, but prices were reduced by nine per cent.

Fish is a small part of Zambeef's operations, but this division presents an exciting opportunity to increase the Group's protein footprint as fish continues to be one of the cheaper sources of protein.

It is expected that the demand for leather products will continue to remain stagnant as global economic issues persist.

ZAMANITA

Edible Oils and Animal Feed Cake

This division contributed 23 per cent. of Group turnover and 19 per cent. of gross profitability.

Zamanita, our edible oils and animal feed cake division, has achieved greatly improved performance. Turnover has increased by 17 per cent. and gross profitability has increased by 73 per cent. while gross margins have significantly improved from 15 per cent. in 2010 to 22 per cent. in 2011.

Zamanita, the largest edible oil producer in Zambia, sells palm, soya and cottonseed oils, as well as animal feed cake (a by-product of oil seed crushing that is a key ingredient in animal stock feed). Zamanita currently imports palm oil, processes it, packages it and distributes it through Zambeef's retail network and other retailers and wholesalers, including Shoprite. The crushing of soya beans and cotton seeds attract significantly higher margins than the importation and distribution of palm oil.

Zamanita's performance has been erratic since its purchase in 2008. Performance has been affected by expensive stock, forward contracts, volatile commodity prices, inefficiencies in production, and tax legislation. These issues have now been addressed and new management installed to ensure operating efficiency, and to oversee a refocus of the business which includes a redevelopment of the plant.

On acquiring Zamanita, the product mix was 75 per cent. palm oil and 25 per cent. seed crushing. We have since changed the business model with less emphasis on the importation of low margin palm oil and to increased focus on the high margin oil seed crushing. This decision, combined with an increase in pricing of edible oil and feed cake in line with increasing commodity prices, increased blending of soya oil with palm oil and increased crushing efficiencies, have resulted in the gross margin increasing.

During the year Zamanita crushed 23 per cent. more soya beans and 152 per cent. more cotton seed, leading to an increase in cake production of 27 per cent.

Critical to Zamanita is the availability of soya beans. However, domestic and regional demand for soya beans far outweighs supply and Zamanita has not been able to capitalise on its potential for soya bean crushing due to insufficient supply. Following the acquisition of Mpongwe Farm the Group will now have capacity to internally produce up to 40,000 MT of soya beans and will be less reliant on external supply.

Once Zampalm commences production of crude palm oil, Zamanita will also stand to benefit through the refining and selling of palm oil at a lower cost than current importation.

Through an investment of over USD6 million to upgrade and expand the plant, Zamanita will increase its crushing capacity and production efficiencies. This investment should increase the crushing capacity to 100,000 MT per annum, increase the percentage extraction of crude oil from the crushing by one per cent., and reduce the cost of production through reduced quantities of hexane and coal consumption. The investment will also provide for improvements in the crude oil refinery.

Zamanita's plant will close between December 2011 and June 2012 in order to carry out this significant upgrade. However, it is expected that with the plant's increased capacity and production efficiencies, Zamanita will achieve similar crushing tonnage in 2012 as in 2011, with the full benefit of the upgrade and expansion being seen in 2013.

The anticipated increase in the Group's soya beans output is the key driver for margin improvement at Zamanita. With sufficient internal and external supply of soya beans we anticipate Zamanita becoming even more important to the Group.

Fish

This division contributed one per cent. of Group turnover and one per cent. of gross profitability.

Turnover of this division increased by 68 per cent. and gross profitability has increased by 45 per cent while gross margins have decreased from 26 per cent. in 2010 to 22 per cent. in 2011.

RETAILING NETWORK

Zambeef Stores

The vast majority of Zambeef's food products as well as 45 per cent. of Zamanita's edible oil output is sold through Zambeef's extensive retail networks.

Zambeef currently operates 31 retail outlets in Lusaka, 33 retail outlets in Copperbelt, and 22 retail outlets across the rest of Zambia, all operating under the Zambeef banner, along with one new wholesale centre in Lusaka and one in Copperbelt.

During 2011, we have opened seven new retail outlets, and refurbished a further eight outlets; all of which are performing well. We have also established Zambeef's first wholesaling stores in Lusaka and Kitwe. Wholesale provides the Group with access to the large and untapped informal sector, commercial customers and large scale consumers such as hotels, lodges, restaurant and other similar operations. Our strategy is to ensure that all of our stores are segmented with a perishable goods area (meat, poultry, eggs, dairy, etc.), a dry goods area (flour, maize meal, packed oil) and bulk edible oil at the point of sale.

Average monthly turnover growth from new outlets has been ZMK500 million (USD0.1 million). Average monthly turnover from the two wholesale centres has been ZMK2, 600 million (USD0.5 million) and average increase in turnover from refurbished stores has been 29 per cent.

Turnover from existing outlets has increased by nine per cent. in Lusaka, 25 per cent. in Copperbelt, and 18 per cent in the other areas of Zambia. Overall, including new outlets, turnover generated from retail operations has increased by 32 per cent. to ZMK392 billion (USD82.5 million) (2010: ZMK297billion (USD62.4 million)).

Shoprite

Zambeef continues to partner with Shoprite. Shoprite is Africa's largest food retailer with 1,246 stores and 274 franchise outlets in 16 countries across Africa and the Indian Ocean Islands. Zambeef currently operates all of Shoprite's 20 in-house butcheries in Zambia, as well as being one of the key suppliers of other perishable and non-perishable merchandise to Shoprite.

Fast Food Outlets

Zambeef operates seven fast food outlets which trade under the brand 'Zamchick Inn'.

In 2011 Zambeef will also launch 'Zambeef Express', installing freezer and display units in convenience stores across the country. A pilot phase will initiate 'Zambeef Express' in ten stores, with the opportunity to expand depending on market uptake.

Our large retail network is key to the Zambeef model. It allows the Group to be close to, and understand its end user, the customer. The Group is able to add maximum value to its primary and secondary production facilities while engaging its brand power to drive customer loyalty and the average spend per customer. Management will continue to focus on the retail operations. This will benefit all Zambeef divisions and contribute to volume and margin increases across Zambeef's product range.

WEST AFRICA

Nigeria & Ghana

In 2011, this division contributed three per cent. of Group turnover and three per cent. of gross profitability.

Turnover has increased by 26 per cent. and gross profits have increased by 54 per cent. while gross margins have increased from 24 per cent. in 2010 to 30 per cent. in 2011.

West Africa is an exciting growth division within the Group. Shoprite, Africa's largest food retailer, currently owns and operates three stores in Nigeria and two stores in Ghana. We continue to expand our presence in West Africa by partnering with Shoprite and currently operate all of their in-house butcheries. 2011 saw the roll out of one additional Shoprite store in Enugu (Nigeria). Shoprite are committed to increasing their footprint in West Africa and expect to increase their infrastructure in Nigeria and Ghana over the next twenty four with an additional five stores lined to open.

The increased supply to external parties, other than Shoprite, at higher prices have led to gross margins increasing during the year. Margins have also increased from the commencement of feedlotting operations.

In Ghana we have opened a processing plant in Accra, which allows for higher value and higher margin product supply.

We are confident that West Africa will play a key part in the Group's future strategy.

Consolidated Statement of Comprehensive Income

FOR THE YEAR ENDED 30 SEPTEMBER 2011

Group	Notes	2011 ZMK'Ms	2011 USD'000s	2010 ZMK'Ms	2010 USD'000s
Revenue	5	983,138	206,802	770,528	161,910
Net gain arising from price changes in fair value of biological assets	16	17,057	3,587	2,565	534
Cost of sales		(665,248)	(139,934)	(530,949)	(111,562)

Gross profit		334,947	70,455	242,144	50,882

Administrative expenses		(265,857)	(55,922)	(208,673)	(43,849)
Other income		1,147	241	290	61
Operating profit	6	70,237	14,774	33,761	7,094

Exchange losses on translating foreign currency transactions and balances		(1,562)	(328)	(7,991)	(1,679)
Finance costs	8	(18,319)	(3,854)	(10,236)	(2,151)
Profit before taxation		50,356	10,592	15,534	3,264
Taxation (charge)/credit	9	(5,816)	(1,223)	4,286	901

Group profit for the year		44,540	9,369	19,820	4,165

Group profit attributable to:
Equity holders of the parent		44,436	9,347	19,789	4,158
Non-controlling interest		104	22	31	7
		44,540	9,369	19,820	4,165
Other comprehensive income:
Exchange losses on translating presentational currency		(390)	(275)	(707)	(1,755)
Total comprehensive income for the year		44,150	9,094	19,113	2,410

Total comprehensive income for the year attributable to:
Equity holders of the parent		44,089	9,082	19,185	2,426
Non-controlling interest		61	12	(72)	(16)
		44,150	9,094	19,113	2,410
		Kwacha	Cents	Kwacha	Cents
Earnings per share
Basic and diluted earnings per share	11	242.60	5.10	124.69	2.62

The accompanying notes form part of the financial statements.

Consolidated Statement of Financial Position - 30 September 2011

ASSETS	Notes	2011 ZMK'Ms	2011 USD'000s	2010 ZMK'Ms	2010 USD'000s
Non-current assets
Goodwill	13	15,699	3,270	15,699	3,270
Property, plant and equipment	14	756,013	157,503	477,622	99,505
Plantation development expenditure	14	43,126	8,985	30,808	6,418
Biological a ssets	16	2,573	536	3,666	764
Deferred tax asset	9(e)	291	61	2,567	535
		817,702	170,355	530,362	110,492
Current assets
Biological assets	16	116,760	24,325	59,793	12,457
Inventories	17	167,522	34,900	132,690	27,644
Trade and other receivables	18	72,746	15,155	55,195	11,499
Amounts due from related companies	19	2,091	436	984	205
Income tax recoverable	9(c)	246	51	246	51
		359,365	74,867	248,908	51,856
Total assets		1,177,067	245,222	779,270	162,348
EQUITY AND LIABILITIES
Capital and reserves
Share capital	21	248	61	159	42
Share premium	22	506,277	123,283	259,967	71,861
Reserves		237,629	31,688	195,921	23,107
		744,154	155,032	456,047	95,010
Non-controlling interest		439	91	378	79
		744,593	155,123	456,425	95,089
Non-current liabilities
Interest bearing liabilities	23	172,627	35,964	136,912	28,523
Obligations under finance leases	24	7,316	1,524	1,294	270
Deferred liability	25	5,107	1,064	5,168	1,077
Deferred tax liability	9(e)	3,444	718	1,420	296
		188,494	39,270	144,794	30,166
Current liabilities
Interest bearing liabilities	23	25,925	5,401	29,258	6,095
Obligations under finance leases	24	3,369	702	1,083	226
Trade and other payables	26	116,117	24,191	86,549	18,030
Amounts due to related companies	27	331	69	763	159
Taxation payable	9(c)	962	200	608	127
Dividends payable	10	18	4	7,916	1,649
Cash and cash equivalents	20	97,258	20,262	51,874	10,807
		243,980	50,829	178,051	37,093
Total equity and liabilities		1,177,067	245,222	779,270	162,348

The accompanying notes form part of the financial statements. The financial statements on pages 66 to 127 were approved by the Board of Directors on 23 November 2011 and were signed on its behalf by:

Company Statement of Financial Position - 30 September 2011

ASSETS	Notes	2011 ZMK'Ms	2011 USD'000s	2010 ZMK'Ms	2010 USD'000s
Non-current assets
Property, plant and equipment	14	552,424	115,088	299,565	62,409
Investment in subsidiaries	15	94,112	19,607	94,112	19,607
		646,536	134,695	393,677	82,016
Current assets
Biological assets	16	114,506	23,855	57,812	12,044
Inventories	17	80,898	16,854	51,293	10,686
Trade and other receivables	18	12,976	2,704	9,362	1,950
Amounts due from related companies	19	148,320	30,900	159,813	33,295
Income tax recoverable	9(c)	26	5	26	5
		356,726	74,318	278,306	57,980
Total assets		1,003,262	209,013	671,983	139,996

EQUITY AND LIABILITIES
Capital and reserves
Share capital	21	248	61	159	42
Share premium	22	506,277	123,283	259,967	71,861
Reserves		186,358	21,008	179,424	19,670
		692,883	144,352	439,550	91,573
Non-current liabilities
Interest bearing liabilities	23	158,081	32,934	136,912	28,523
Obligations under finance leases	24	5,811	1,211	696	145
Deferred liability	25	523	109	634	132
Deferred tax liability	9(e)	1,761	367	288	60
		166,176	34,621	138,530	28,860
Current liabilities
Interest bearing liabilities	23	24,184	5,038	29,258	6,095
Obligations under finance leases	24	1,734	361	252	52
Trade and other payables	26	55,073	11,472	20,671	4,307
Amounts due to related companies	27	288	60	751	157
Dividends payable	10	18	4	7,916	1,649
Cash and cash equivalents	20	62,906	13,105	35,055	7,303
		144,203	30,040	93,903	19,563
Total equity and liabilities		1,003,262	209,013	671,983	139,996

The accompanying notes form part of the financial statements. The financial statements on pages 66 to 127 were approved by the Board of Directors on 23 November 2011 and were signed on its behalf by:

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2011

	2011 ZMK'Ms	2011 USD'000s	2010 ZMK'Ms	2010 USD'000s
Cash inflow from operating activities
Profit before taxation	50,356	10,592	15,534	3,264
Finance costs	18,319	3,854	10,236	2,151
Depreciation	31,296	6,583	28,683	6,028
Impairment of biological assets	1,452	302	1,822	380
Fair value price adjustment	(17,057)	(3,587)	(2,565)	(534)
Net unrealised foreign exchange losses	4,054	887	7,619	1,633
Earnings before interest, tax, depreciation and amortisation	88,420	18,631	61,329	12,922
Increase in biological assets	(40,265)	(8,389)	(15,179)	(2,615)
(Increase)/decrease in inventory	(34,832)	(7,256)	9,156	2,408
Increase in trade and other receivables	(17,551)	(3,656)	(6,114)	(1,100)
(Increase)/decrease in amounts due from related companies	(1,107)	(231)	1,143	246
Increase in trade and other payables	29,568	6,161	16,810	3,256
Decrease in amounts due to related companies	(432)	(90)	(964)	(207)
(Decrease)/increase in deferred liability	(61)	(13)	416	70
Income tax (paid)/recovered	(1,160)	(244)	1,908	401
Net cash inflow from operating activities	22,580	4,913	68,505	15,381
Investing activities
Purchase of property, plant and equipment	(76,370)	(16,064)	(77,251)	(16,232)
Purchase of Mpongwe Farm assets	(234,774)	(49,384)	-	-
Expenditure on plantation development	(12,318)	(2,591)	(12,414)	(2,592)
Proceeds from sale of assets	1,559	328	1,016	214
Net cash outflow on investing activities	(321,903)	(67,711)	(88,649)	(18,610)
Net cash outflow before financing	(299,323)	(62,798)	(20,144)	(3,229)
Financing
Proceeds from issue of shares	246,399	51,441	-	-
Long term loans repaid	(49,290)	(10,269)	(10,291)	(2,873)
Receipt from long term loans	81,672	17,015	117,500	25,000
Lease finance received	11,900	2,479	2,243	452
Lease finance paid	(3,592)	(748)	(1,410)	(284)
Finance costs	(18,319)	(3,854)	(10,236)	(2,151)
Dividends paid	(9,965)	(2,096)	-	-
Net cash inflow from financing	258,805	53,968	97,806	20,144
(Decrease)/Increase in cash and cash equivalents	(40,518)	(8,830)	77,662	16,915
Cash and cash equivalents at beginning of year	(51,874)	(10,807)	(121,184)	(25,675)
Effects of exchange rate changes on the balance of cash held in foreign currencies	(4,866)	(625)	(8,352)	(2,047)
Cash and cash equivalents at end of year	(97,258)	(20,262)	(51,874)	(10,807)
Represented by:
Cash in hand and at bank	30,844	6,426	33,949	7,073
Bank overdrafts	(102,625)	(21,380)	(64,576)	(13,454)
Structured agricultural finance	(25,477)	(5,308)	(21,247)	(4,426)
	(97,258)	(20,262)	(51,874)	(10,807)

Company Cash Flow Statement

FOR THE YEAR ENDED 30 SEPTEMBER 2011

	2011 ZMK'Ms	2011 USD'000s	2010 ZMK'Ms	2010 USD'000s
Cash inflow from operating activities
Profit before taxation	10,810	2,274	5,121	1,076
Finance costs	13,053	2,746	5,950	1,250
Depreciation	14,679	3,088	14,210	2,986
Fair value price adjustment	(16,966)	(3,569)	(2,474)	(515)
Net unrealised foreign exchange differences	(13)	31	3,948	830
Earnings before interest, tax, depreciation and amortisation	21,563	4,570	26,755	5,627
Increase in biological assets	(39,728)	(8,277)	(13,720)	(2,711)
Increase in inventory	(29,605)	(6,168)	(1,737)	(187)
(Increase)/decrease in trade and other receivables	(3,614)	(752)	492	137
Decrease/(increase) in amounts due from related companies	11,494	2,394	(74,311)	(15,179)
Increase in trade and other payables	34,402	7,167	2,141	380
(Decrease)/increase in amounts due to related companies	(463)	(96)	509	105
Decrease in deferred liability	(111)	(23)	(711)	(153)
Income tax (paid)/recovered	(22)	(5)	1,916	403
Net cash outflow from operating activities	(6,084)	(1,190)	(58,666)	(11,578)
Investing activities
Purchase of property, plant and equipment	(32,763)	(6,892)	(48,020)	(10,090)
Purchase of Mpongwe Farm assets	(234,774)	(49,385)	-	-
Proceeds from sale of assets	-	-	-	-
Net cash outflow from investing activities	(267,537)	(56,277)	(48,020)	(10,090)
Net cash outflow before financing	(273,621)	(57,467)	(106,686)	(21,668)
Financing activities
Proceeds from issue of shares	246,399	51,440	-	-
Long term loans repaid	(49,290)	(10,269)	(7,777)	(1,634)
Receipt from long term loans	65,385	13,622	117,500	25,000
Lease finance received	8,923	1,861	948	199
Lease finance paid	(2,326)	(485)	-	-
Interest paid	(13,053)	(2,746)	(5,950)	(1,250)
Dividends paid	(9,965)	(2,096)	-	-
Net cash inflow from financing activities	246,073	51,327	104,721	22,315
(Decrease)/Increase in cash and cash equivalents	(27,548)	(6,140)	(1,965)	647
Cash and cash equivalents at beginning of year	(35,055)	(7,303)	(29,142)	(6,174)
Effects of exchange rate changes on the balance of cash held in foreign currencies	(303)	338	(3,948)	(1,776)
Cash and cash equivalents at end of year	(62,906)	(13,105)	(35,055)	(7,303)
Represented by:
Cash in hand and at bank	8,904	1,855	13,359	2,783
Bank overdrafts	(65,529)	(13,652)	(43,276)	(9,016)
Structured agricultural finance	(6,281)	(1,308)	(5,138)	(1,070)
	(62,906)	(13,105)	(35,055)	(7,303)