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Monday 13 June, 2011

Zambeef Products PLC

Intention to list on AIM

RNS Number : 3038I
Zambeef Products PLC
13 June 2011

For Immediate Release

13 June 2011








Zambeef Products PLC ("Zambeef" or the "Group"), a fully integrated African agri-business with operations in Zambia, Nigeria and Ghana, is pleased to announce its intention to apply for admission to trading on AIM and to raise approximately US$55.0m via a rights issue on the Lusaka Stock Exchange ("LuSE") (the "Rights Issue") as well as a private placing of ordinary shares on AIM (the "Placing") (together the "Fundraise").


Zambeef was incorporated in June 1994 and listed on the LuSE in February 2003 and will be the first Zambian business to list on AIM.


Strand Hanson Limited is acting as financial and nominated adviser to the Group and the sole bookrunner and broker is Renaissance Capital Limited.




·     The Group is a fully integrated ("farm to fork") agricultural business principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, flour and bread.


·     The Group aims to become the leading food provider in Zambia and the surrounding region.


·     The Group has, through organic growth and acquisitions, become one of Zambia's largest agri-businesses with annual revenues of US$162 million for the financial year ended 30 September 2010.


·     On 8 February 2011, the Group announced that it had entered into an agreement to acquire certain assets owned by ETC Bio-Energy Limited (the "ETC Assets"), subject to the successful completion of the Fundraising. The ETC Assets comprise three farming estates totalling 46,876 Ha of land in the Copperbelt Province of Zambia.


·     The ETC Assets will provide the Group with the agricultural throughput for its processing operations which, the board of directors of Zambeef (the "Board") believes, should generate additional value and higher margins whilst reducing the impact of the volatility of commodity price fluctuations and an erratic supply chain on the Group.


·     The Board believes that the ETC Assets are among the best farming lands in Zambia and will enable the Group to significantly expand its cropping operations.


·     An established and proven management team led by Francis Grogan, CEO and co-founder, an Irish national with more than 22 years experience in agriculture and meat, both in Ireland and Zambia.  The second co-founder of Zambeef is Carl Irwin, ACA (UK), FZICA, Director of Strategy and Development, a Zambian national with over 20 years accounting and finance experience, having previously worked with Coopers & Lybrand in London.


·     In addition to agricultural production, the Group has diversified its operations to ensure margin capture throughout the value chain and to reduce revenue and earnings volatility. The "farm to fork" strategy significantly reduces risk by allowing Zambeef to supply its own processing divisions with raw materials and to sell the finished products directly to the end consumer through its extensive retail network.


·     Rapid urbanisation in many African countries is a key driver to growth. The McKinsey Global Institute estimates that 50 per cent. of Africans will be living in cities by 2030, in comparison to 28 per cent. in 1980, and 40 per cent. today. In addition to this, consumer spending is predicted to increase to US$1.4 trillion by 2020 in versus $860 billion today.


·     Zambia has a liberalised foreign exchange regime, multi party democracy, positive GDP growth rates and single digit inflation.


·     Zambia's vast expanses of rich, undeveloped land with free-flowing and easily accessible water supplies has considerable potential for agricultural production, coupled with an ideal climate suitable for the production of exportable crops. Only a small proportion of land is currently cultivated.


·     The population of Zambia has grown by nearly seven million since 1960 which has resulted in an increased demand for farming produce in the country.


Francis Grogan, Chief Executive Officer of Zambeef, commented :


"Zambeef is at an important stage in its development. The Acquisition, together with the Fundraise and the AIM admission, will position the Group well to capitalise on the opportunities that we have identified and to drive  our operational growth in order that we  achieve our long-term aim of becoming a  major provider of  food in Zambia and throughout our neighbouring countries."




For Further Information, contact:



Mark Edwards/ Christian Goodbody

+44 (0) 207 466 5000

Strand Hanson Limited

Angela Peace/ James Spinney


Renaissance Capital Limited

+44 (0) 207 409 3494

Mesh Pillay

+27 2750 1495






Zambeef is one of the largest agri-businesses in Zambia and also has operations in Nigeria and Ghana.


The Group is principally involved in the production, processing, distribution and retailing of beef, chicken, pork, milk, dairy products, eggs, edible oils, stock feed, flour and bread. The Group also has large row cropping (principally maize, soya beans and wheat) operations, with approximately 5,000 Ha of row crops under irrigation and 1,500 Ha of rain-fed/dry-land crops available for planting each year. The Group is also in the process of rolling out its West Africa expansion in Nigeria and Ghana, in conjunction with Shoprite, as well as a palm project within Zambia.


The Company was incorporated in June 1994 and listed on the LuSE in February 2003. Since its

incorporation as a small scale start-up business, the Group has, through organic and acquisitive growth, become one of Zambia's largest agri-businesses with annual revenues of ZMK770.5 billion (approximately US$162 million) for the financial year ended 30 September 2010.


Zambeef has one of the leading distribution and retail footprints in Zambia. The Group currently operates 87 stores under the "Zambeef" banner and 20 in-house butcheries in Shoprite supermarket outlets in Zambia, under the Concessionary Agreement between Zambeef and Shoprite. In addition, the Group has seven of its own fast food outlets under the brand "Zamchick Inn". The Group also operates two in-house butcheries in Shoprite outlets and four stores under the "Zambeef" banner in Nigeria and a further two in-house butcheries in Shoprite outlets in Ghana.


On 8 February 2011, the Company announced that it had entered into the Acquisition Agreement to acquire the ETC Assets, subject to, inter alia, shareholder approval and the raising of the requisite funding pursuant to the Rights Issue, the Placing and such additional debt funding as is necessary. Together, the ETC Assets extend to approximately 46,876 Ha, of which 2,994 Ha is irrigated and 7,667 Ha is dry-land farming (excluding the 2,137 Ha jatropha plantation), and will significantly expand the Group's cropping operations. These assets will provide the Group with the agricultural throughput for its processing operations which the Directors believe should generate additional value and higher margins whilst reducing the impact of the volatility of commodity price fluctuations and an erratic supply chain on the Group. Shareholder approval for the Acquisition was obtained at an extraordinary general meeting of the Company on 19 May 2011.


It is intended that the Acquisition will be financed by way of a Rights Issue on the LuSE and the Placing of untaken or renounced rights via the issue of 89,272,150 Rights Issue Shares at the Rights Issue Price ZMK 2,975 Placing Shares at the Placing Price, representing 36 per cent. of the Enlarged Share Capital to raise in aggregate US$55 million. It is intended that the net proceeds of the Rights Issue and the Placing will, in addition to financing the Acquisition, be used to provide further capital for the Group's capital development program with respect to the ETC Assets.


 Key investment proposition


The Directors believe that an investment in the Company should be attractive to investors for the following reasons:


•              the Company has an established and proven management team with the requisite experience and a broad range of technical, operational and financial skills. Management has the expertise and an established track-record in identifying and exploiting commercial agri-businesses in Zambia;


•              there are limited opportunities for investors to gain exposure to African agriculture, particularly via the AIM market, as there are currently few AIM listed African agricultural companies with similar operations to the Company;


•              in addition to agricultural production, the Group has diversified its operations to ensure margin capture throughout the value chain and to reduce revenue and earnings volatility. Additionally, the Group's "farm-to-fork" strategy significantly reduces the Group's risk profile by allowing it to supply its own processing divisions with raw materials, and to sell the finished products directly to the end consumer through its extensive retail network therefore reducing its exposure to sudden price fluctuations;


•              the Group has the necessary infrastructure to continue production without the need for intensive capital expenditure to enhance on-going operations;


•              Sub-Saharan Africa provides a compelling macro-economic backdrop, where the IMF projects economic growth of 5.5 per cent. in 2011 and 5.9 per cent. in 2012;


•              Rapid urbanisation in many African countries is a key driver of consumer growth. The IMF estimates that 50 per cent. of Africans will be living in cities by 2050 with a consumer spending power of US$1.5 trillion; and


•              the global outlook for the food and agriculture sector is very positive with meat consumption per capita in OECD countries expected to increase from an average of 66.3kg rwt in 2009/2011 to 68.7kg in 2018. Per capita consumption in non-OECD countries is expected to increase from an average of 25.6kg rwt in 2009/2011 to 28.0kg rwt in 2018.


Overview of Zambian agricultural industry



Zambia is a landlocked country, occupying a near central position on the southern African sub-continent and covers an area of 752,620 kmR, which is approximately 2.5 per cent. of the continent's total area. Zambia shares borders with eight countries: Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, Namibia, Angola and the Democratic Republic of Congo. The country has a population of approximately 13 million people with 86 per cent. under 40 years of age.


Although Zambia has a predominantly tropical climate, the relatively high altitude of parts of the country (between 900 and 1500 metres above sea level) permits the production of temperate crops, such as soya beans, maize, wheat and barley in addition to a number of soft fruits as well as livestock, which includes dairy cattle. The country is endowed with ample water resources comprising seven big lakes: the Kariba in the south and Bangweulu, Mweru, Tanganyika, Chifunabuli, Walipe and Kampolombo in the north1, as well as two large rivers: the Zambezi and Kafue.


The agricultural industry in Zambia contributed 18 per cent. of GDP in the decade leading up to 2007 and accounted for 70 per cent. of Zambia's employment during this period. Non-traditional agriculture-based export earnings have increased at a high rate since 1999 with the main exports in this field being sugar, cotton, tobacco, cut flowers and coffee. The livestock sub-sector has also contributed significantly to the agricultural industry, providing products such as meat, milk, eggs, hides, manure and draught power. The agricultural sector also generates employment opportunities and income through the rural workforce2.



Description of the ETC Assets


The ETC Assets are situated in the Copperbelt Province of Zambia, approximately 120 km south-west of Ndola and comprise three separate, but adjoining, farming estates totalling 46,876.5 Ha, summarised as follows:


·           Farm 4451 - Nampamba farm;

·           Farm 4450 - Cambatata farm and

·           Farm 5388 - Kampemba farm.


According to the Bosch report, the Nampamba and Chambatata estates appear to be the most valuable agricultural assets, with Kampemba, being more remote and having poorer soils, being considered less profitable.


Description of Nampamba Farm

Described as Lot No 4451, Mpongwe, the farm estate covers 22,921.52 Ha and is held under a 99 year lease which commenced on 1 August 1984.  The main agricultural operation and irrigation infrastructure are to be found on this property.


Description of Chambatata Farm

Describes as Lot no 4450, Mpongwe, the farm estate covers 12,491.15 Ha and is held under a 99 year lease which commenced on 1 August 1984.  This property is currently leased to tenant farmers, who farm dry-land crops.


Description of Kampenba Farm

Described as Lot No 5388, Mpongwe, the farm estate covers 11,463.15 Ha and is held under a 99 year lease which commenced on 1 August 1991.  This was the most recent acquisition to the ETC estate and its infrastructure is generally newer then that on Nampamba farm.


Current ETC Agricultural Operations

At present ETC farms a variet of crops during both the summer and winter growing periods on Nampamba and Kampermba farms.  The primary summer crops include soya beans and white maize.  The primary winter crop is wheat.


Other crops cultivated include barley, paddy rice and dry beans.  There is also a jatropha plantation of 2,137.3 Ha.


The estate also runs a very small breeding herd (circa 350 head) of Boran cattle on Kampemba farm.


A summary of the 2010/2011 irrigated and non-irrigated areas is shown in the table below.


Land Area


Area (Ha)

Total (Ha)
















Excluding the 2,137.3 Ha under jatropha, the total current developed/cultivated arable area on all three farms is 10,660.8 Ha.  Of this, 5,574.1 Ha are operated by ETC under irrigated and rain-fed conditions, whilst tenant farmers operate the remaining 5,086.7 Ha under rain-fed conditions.


ETC's seasonal forecast for 2010/2011 was based on the following average yields:


·     Wheat & barley (irrigated) - 7.8 t/Ha;   

·     Maize (irrigated) - 11.0 t/Ha;

·     Maize (rain-fed) - 8.25 t/Ha;

·     Soya (irrigated) - 3.7 t/Ha;

·     Soya (rain-fed) - 3.5 t/Ha.


Currently, ETC grows 57 per cent soya, 31 per cent white maize, 8 per cent rice and 4 per cent green beans for the summer crop.  Zambeef's intention is to grow 80 per cent soya and 20 per cent maize for the summer crop. For the winter crop, Zambeef will retain ETC's current winter cropping programme of 85 per cent wheat and 15 per cent barley.


Reasons for the Acquisition


The Directors believe that the ETC Farms are some of the largest row cropping farms in Zambia. The

Directors further believe that they have been well managed and efficiently run and are considered to be among some of the best farming lands in Zambia.


The micro-climate, well drained soils and abundant water supply to the area has resulted in the Farmsachieving high yields historically.


The Directors have discussed and approved the Acquisition of the ETC Assets as it believes that the

Acquisition will have a synergistic effect by expanding business, improving the Group's profitability and enhancing shareholder value.


The Acquisition is also 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 and the Group's objective of becoming the key provider of Zambia's food basket.


The Board decided and agreed that it makes sense for Zambeef to continue to expand its cropping operations where quality cropping projects are identified with good irrigation potential. The Board believes that the ETC Assets represent an attractive cropping asset to acquire, due to their good cropping yields, good climate, soils and weather.


Furthermore, the Board decided and agreed that it makes economic sense to expand the production of soya in order to ensure that Zamanita can secure the supply of sufficient oil seed within Zambia. In addition, Zamanita processes all soya produced internally which maximises the return from the crop grown across the value chain.


Currently, the Group is not self-sufficient in its internal requirements for soya. The current soya production in Zambia and the surrounding region is erratic, leading to a supply deficiency of the crop, which results in Zamanita having major input sourcing problems. Having a large internal production base of soya will provide Zamanita with the majority of its soya input requirements from internal sources.


The Acquisition will enable Zambeef to secure an additional c.25,000 tons plus of soya per annum, which will result in more crushing of soya by Zamanita, thus leading to higher margins and income for the group. The increased soya crushing will also increase the throughput of soya cake to Zambeef's stock feed plant.


The winter cropping season will see the cultivation of wheat for use, and further value-add processing, in Zambeef's wheat mill and bakery, to produce value-added wheat products such as flour and bread, which are retailed through Zambeef's nationwide retail outlets.


It is also Zambeef's intention to convert 2,000 Ha of the existing rain-fed/dry-land cropping area to fully irrigated, thus increasing the irrigated area to approximately 5,000 Ha, which will result in an additional internal supply of over 15,000 tons p.a. of wheat from the Farms, and will make Zambeef fully self-sufficient in its internal requirements for wheat. Any surplus wheat from the expanded group of farms will be sold on the open market to third parties.


Future Strategy


The Group regularly seeks new ways of expanding the Business and increasing profitability through

diversification of its traditional products. The Board believes that the Acquisition will further expand the Business and ultimately enhance Shareholder value.


Following the Acquisition, the Company intends to utilise and further develop the ETC Assets to a stage where they will enable the Group to become largely self-sufficient in its internal requirements for wheat and soya. The wheat from the Farms is expected to be fed into the mill and bakery divisions, allowing the Group to be less dependent on external sources and suppliers and to derive cost efficiencies. The soya will be used by Zamanita and the stock feed division to produce crude soya oil and soya cake, which can be used to make edible soya oil and stock-feed respectively. This should also afford the Group greater control over its supply chain and enable it to satisfy retail demand from its own resources.


The Company is currently in the process of rolling out its West Africa expansion, having acquired a 25 year lease on a farm 60 km north of Lagos, in the Ogun State, which will be developed to house a feedlot, abattoir, processing plant and cold room facilities. This in turn will allow the Nigerian operations to satisfy the demands of Shoprite which is increasing its footprint in Nigeria with an additional six stores over the next 24 months.


Zambeef's palm operations commenced in 2008 with the first pilot phase under project management. There is scope to increase the plantation size and construct a mill subject to viability proven in the pilot phase. Zambeef is also placing greater focus on the retailing operations of the Group including refurbishment of existing retail outlets, rollout of new retail outlets, rollout of wholesale centres, and expansion of the Zamchick Inn footprint.




Brief biographical details of the Directors and key senior management within the Group on Admission are set out below.



The current composition of the Board is as follows:



Dr. Jacob Mwanza (age 74) Board Chairman

Nationality: Zambian

Qualifications: Phd (Cornell University, USA); MA Economics (W. Germany)

Previously Governor of the Central Bank; currently Chancellor of the University of Zambia. Has served and is currently on several boards, including LuSE and Konkola Resources PLC.


Francis Grogan (age 48) Chief Executive Officer

Nationality: Irish

Qualifications: BSc Agriculture (Ireland)

Experience: Over 22 years' experience in agriculture and meat, both in Ireland and Zambia. Co-founder of Zambeef. Other directorships include Zambezi Ranching & Cropping Ltd and Tractorzam Ltd.


Carl Irwin (age 45) Director of Strategy and Development

Nationality: Zambian

Qualifications: B. Com; ACA (UK); FZICA

Experience: Over 20 years' accounting and finance experience with a number of companies, including Coopers & Lybrand UK. Co-founder of Zambeef. Other directorships include Proflight Commuter Services Ltd, Zambezi Ranching & Cropping Ltd, Kanyanja Development Company Ltd, Leaopard Investment Company Ltd and Tractorzam Ltd.


Yusuf Koya (age 46) Executive Director

Nationality: British

Qualifications: BSc in Geology & Economics (Keele University, UK); MSc in Economics (Keele University,


Experience: Over 20 years' business management experience in corporate finance and credit risk

management, both in the UK and Zambia. Previously Country Credit Director with Barclays Bank Zambia PLC.


Sushmit Maitra (age 33) Finance Director

Nationality: Indian

Qualifications: BA (Hons) in Accounting & Finance (South Bank University, UK); MSc in International

Accounting & Finance (LSE, UK); ACCA.

Experience: Over 10 years' experience in auditing, corporate finance, and management consultancy with a number of companies in Zambia including Barclays Bank Zambia PLC and Grant Thornton.


Lawrence Sikutwa (age 56) Non-executive Director

Nationality: Zambian

Qualifications: MBA; FCII; Post Grad Diploma in Insurance (UK)

Experience: Over 30 years' experience in business management. Previously General Manager of Zambia State Insurance Corporation; currently Chairman of LSA Ltd Group of Companies and board member of TAP and Consolidated Tourism Investments.


John Rabb (age 68) Non-executive Director

Nationality: South African

Qualifications: BSc (Agriculture); MBA (RSA)

Experience: Over 30 years' business management experience. Formerly Managing Director of the Wooltru Group in South Africa, which was listed on the Johannesburg Stock Exchange. Has served and is currently on several boards, including Wellspring Ltd and Forsythe Ltd.


Irene Muyenga (age 52) Non-executive Director

Nationality: Zambian

Qualifications: BA (ed); DIS; LIII

Experience: Over 20 years' business management experience. Currently CEO and Group Managing Director of Zambia State Insurance Corporation. Has served and is currently on several boards, including African Insurance Organisation, Insurance Advisory Council, Organisation for Eastern & Southern African Insurers, Zambia Insurance Business College, PTA Re-Insurance Company, National Pension Authority and Mulungushi University.


Adam Fleming (age 63) Non-executive Director

Nationality: British

Experience: Over 30 years' business management and banking experience. Previously Chairman of

Harmony Gold (listed on Johannesburg Stock Exchange and one of the largest gold mining companies in the world); currently Chairman of Witwatersrand Consolidated Gold Resources Ltd. Has served and is currently on several boards, including Zambezi Ranching & Cropping Ltd.


Stanley Zingani Phiri (age 51) Non-executive Director

Nationality: Zambian

Qualifications: Bacc; FCCA; FZICA

Experience: Over 22 years' in business management and finance experience; currently Director General of National Pension Authority. Previously Director of Finance and Investment for ZSIC.



Reasons for Admission and use of proceeds


The Directors' reasons for seeking Admission are as follows:


•              to finance the cash offer for the ETC Assets


•              to provide the Group with a flexible financial structure for further development and growth, both organically and via potential acquisitions or joint ventures;


•              to help improve the Group's ability to access further funding from international capital markets to finance the future growth of the business consistent with the Company's stated strategy;


•              to help to maintain a high level of transparency and corporate governance within the Group;


•              to raise the profile of the Group and assist the Group in recruiting, retaining and incentivising skilled employees;


•              to enable the Group to access a wider range of potential investors and broaden its investor base; and


•              to help to enhance the Group's reputation and financial standing with its key partners and suppliers and with potential vendors of additional attractive assets.


The Company intends to use the Rights Issue and Placing proceeds to pursue its growth strategy. In

particular, the proceeds will be used to purchase the ETC Assets free of debt and liabilities. The Board intends to apply the Placing proceeds of US$55 million as follows:


• Acquisition price:                                                                                                                                         46,000,000

• Estimated expenditure to expand irrigated area by extra 2,000 Ha:                                      10,013,000

• Estimated expenditure to upgrade & refurbish existing infrastructure:                                5,717,000

• Estimated costs of the Placing and Rights Issue (and related matters):                                     500,000

• TOTAL:                                                                                                                                                              65,230,000


The shortfall of US$10,230,000 and additional working capital of US$35,000,000 will be funded through a combination of internal cash and debt facilities provided by lending institutions. The Company has received an indicative term sheet for working capital facilities totalling US$35,000,000 from Standard Chartered Bank Zambia Plc and expects these facilities to be in place prior to Admission.


The Company is constantly seeking new ways of expanding the lines of business through diversification and value addition to the traditional product lines and by maximising the utilisation of raw materials and by products.



Dividend policy


The Company generally declares and pays dividends in two instalments for each fiscal year, with an interim dividend paid before the end of the financial year to which it relates and a final dividend for each financial year proposed by the Board to the Shareholders for approval at the Annual General Meeting.


No interim dividend was paid to Shareholders in the 2010 financial year. A final dividend for the year ended 30 September 2010 of ZMK 7,916 million (2009: nil) was proposed by the Board. This resulted in a total dividend for the 2010 financial year of ZMK 7,916 million (2009: nil).


Over the last five financial years, the Company has declared a cash dividend with respect to each financial year other than 2009. The following table sets out, for the periods indicated, the cash dividends paid by the Company.


       2010                       2009                       2008                       2007                       2006

Dividend per share (ZMK)        49.88                      -                              85.69                     82.85                     74.13


The form, frequency and amount of future dividends will depend on the Company's profitability, cash flows, financial position and other factors and shall be at the discretion of the Board and subject to the approval of Shareholders.




This information is provided by RNS
The company news service from the London Stock Exchange

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