ZCCM-IH Getting bigger....

ZCCM-IH's 2004-2015 financials make for interesting reading. The company embarked on investments over the last two years that when consolidated into the accounts led to major impairments being declared in the financials. As a result, the consolidated group's operating expenses were swollen due to administrative costs caused by impairments from its takeovers. Other external macro factors such as the depreciation of the local currency and turmoil in the global commodities market also had an impact. However, although eps nearly 'halfed' in 2014, the consolidated group did make gains in 2015 closing with an eps of 6.14. However, this is still short of its 2013 high prior to the group's ambitious pursuits.

The group is not highly levered hence does not pose a financial risk for investors. This makes the company a prime investment partner for high net worth deals. However, the group will have to get a hold of its spiraling costs. This is noticed by its doubling of operating cashflow between 2014 and 2015 on the back of its investments. A highly volatile EBITDA signals bearish sentiments in the groups ability to manage costs. This may also impact on the preservation and value growth for the group as seen from its fluctuating eps in the interim.

Numbers management will be key in ensuring value growth for investors.

Zambeef aggressively feeding the nation..and literally growing value

Just had a quick look at the Zambeef Financials (2013-15) and quiet impressive. Aside from their acquisitions and haircuts received from exchange losses that may cloud the accounts over the last 2 financial years, financial management is sound in my opinion. No apparent risk of default on obligations (although they have a cocktail of instruments that many a native would believe the CEO solid years in Dubai to finance the short term and long term liabilities) however the notes clearly show it has good relations with the main stream financiers from Citi Bank to Stanbic all rallying behind them. And rightly so as they have gearing at only 33% implying a company that is not a financial risk. Furthermore, EBITDA has been stable on the back of controlled fixed costs that are around 12% meaning that it is not low enough to weather subtitle impacts in revenue change but overall it is safe growth wise. However they may want to lower that going forward. In addition, their operating cash flow may raise a bit of concern when compared to their EBITDA. Failure of the company is not eminent therefore this going concern has my stamp of approval as the company continues to deliver ROI that is supreme. I have visions of a trade sale of galactic proportions.

Lafarge Enters Cement Wars

A case of mixed fortunes. The years 2013 & 2014 will be remembered as the vintage years for the cement company. If you held stock in the company you would have enjoyed your highest dividend to-date at a whopping eps of 2.12 in 2014. However this has cooled to lower than its 2012 eps albeit still in its expected range. The company's labour productivity has improved albeit at the expense of trimming of staff numbers indicating cost control measures by the company in the advent of a known new entrant (acknowledge by the CEO in his letter to shareholders). On back of its greatest performance to-date in circa 2014 the company has being aggressive in managing its operating cash flow. Debt remains a non issue for the company as its gearing is well below 5%.

The company remains highly influenced by the macro conditions therefore its strategy of product diversification and seeking out country markets looks certain to keep it bouncing for some time to come. Internally, they may have to look at their fixed cost component of their cost structure as its EBITDA cools due to fluctuations in sales. 

For those seeking annual consistent growth in dividend it's no buy in the medium term, however those seeking value growth, it's a good buy.

Zambian Breweries - More drinks to come

2015 will be remembered for the wrath of the 50% excise duty on alcoholic beverages and the proliferation of smuggled castle lite prompting a change in strategy. Zambrew loves you. They gave you more beer for less albeit taking a haircut in revenue growth year on year. The stewardship of the company has been great leading it from impending doom in 2011 to a more stable company present day. The company continues to sweat it's asset to the maximum however, return on investment has slumped in 2015 to 13% from its high of 19%. It's labour force has continued to be more productive and the company is managing its debt very well with low gearing.

In my opinion for the old investors in the company, the wait may be long to recover from the current macro headwinds. This is further frustrating as the company issued more shares as part of its financing strategy.

Product diversification may be key in the long term as well as further stakeholder management on the statutory requirements.

Verdict. Uncertain buy