The Zambia Forestry and Forest Industries Corporation ZAFFICO says despite a challenging operating environment in 2023, the corporation managed to perform positively.
According to a statement signed by Mulawo Mwaba Company Secretary, and seen by the Zambian Business Times – ZBT, the Company remained focused on capital investment to achieve operational efficiencies and financial profitability, while also ensuring sustainability.
ZAFFICO faced challenges such as low demand for treated poles from key customers and escalating input costs due to adverse economic conditions. However, the upward price adjustment for Roundwood, coupled with the elevated demand and introduction of a competitive and fair-trading process for selling Roundwood, contributed significantly to the company’s performance.
“Our strong balance sheet and healthy cash generation capabilities allowed us to navigate through the cyclical downturns in the timber industry with flexibility.”
“However, we faced challenges such as low demand for treated poles from key customers and escalating input costs due to adverse economic conditions. Despite these challenges, the upward price adjustment for Roundwood, coupled with the elevated demand and introduction of a competitive and fair-trading process for selling Roundwood, contributed significantly to our performance.”
In terms of financial results, the corporation’s gross profit for the year was ZMW ZMW287 million, representing a slight decrease of 0.3% compared to ZMW ZMW288 million in the prior year.
The gross profit margin for 2023 was 68%, compared to 75% in the prior period, mainly due to the increase in production costs resulting from the depreciation of the kwacha against major currencies. Our net profit for 2023 was ZMW 1.2 billion, reflecting a reduction of 55% compared to the previous year. This reduction was mainly attributed to the stabilization of the value of biological assets.
“Despite the reduction in profitability, our ability to generate sustainable returns for our shareholders remains the primary focus. We generated total revenue of ZMW ZMW423 million from the sale of Roundwood and treated poles, representing a 10% increase compared to ZMW ZMW386 million in 2022. The positive performance was largely driven by the unprecedented increase in demand for eucalyptus saw logs.”
“Our operating expenditure for the year under review was ZMW ZMW411 million, representing a 1.5% increase compared to ZMW ZMW 405 million in 2022. The increase in costs was largely due to adverse microeconomic conditions, such as volatility in fuel price adjustments.”
“Our total non-current assets increased to ZMW 7,423 million as of 31st December 2023, compared to ZMW 5,920 million in 2022, representing a growth of 25%. The increase was mainly attributed to the gain in value of biological assets and our land and buildings following revaluation.”
“Similarly, our shareholders’ funds increased to ZMW 6,746 million as of 31st December 2023 from ZMW 5,5442 million in 2022, mainly attributed to the revaluation of biological assets and the gain in the value of our land and buildings.”
In 2023, we continued to generate healthy cash flows, providing us with financial flexibility to invest in growth opportunities. Our strong cash flow position underscored the resilience of our business model and our ability to weather economic uncertainties.
ZAFFICO plans to prioritize plantation expansion, value addition, mechanization and automation, while also optimizing cost structures by implementing Information Communications Technology (ICT) projects and modernizing forestry operations.
“Looking ahead, we will continue to implement measures that will deliver long-term operational excellence, efficiency, financial and business sustainability in line with our 2024-2028 strategic plan. The forest inventory results of 2023 have provided a baseline that calls for an offset in the trajectory of future harvest, mandating us to focus on broadening the business by investing in value-addition initiatives. We will prioritize plantation expansion, value addition, mechanization and automation, while also optimizing cost structures by implementing Information Communications Technology (ICT) projects and modernizing our forestry operations.”
Meanwhile, The Board of Directors has resolved not to declare a dividend for the financial year ended 31 December 2023 in order to reinvest earnings into planned growth initiatives. This decision is aimed at achieving the Corporation’s long-term strategic objectives of delivering sustainable returns to shareholders.
