Post COVID19 recovery is spelling sales recovery prospects for Anheuser – Busch InBev subsidiary Zambian Breweries Plc that grew its top line by 27% in 1H22 to K1.64 billion according to stock exchange news release on the local bourse. Demand fundamentals have restored to pre-pandemic levels and this has continued to support business for the brewer. However the Lusaka Securities Exchange listed brewer incurred a 473% widening in financing costs, likely on account of rising dollarized interest costs, that softened after tax earning 19% to K72.9 million.
Zambrew (ISIN:ZM0000000078) currently reflects a price earnings ratio of 26.9 which is 42% higher that a year ago while its price to book value ratio is 6% stronger at 3.2 typical of an overvalued stock. On the upside, the brewer posted 200% improved operational cashflow position in tandem with its robust cost containment supporting margins.
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The outlook of Zambian Breweries is fairly positive with its plant expansion initiative likely to yield desired fruit. The entities environmental social and governance posture could earn it fairly priced capital for the sought expansion. The Ab InBev subsidiary has focused on a 5 pillar sustainability strategy skewed towards smarter agriculture, water stewardship, more enviro friendly packaging, responsible alcohol intake and climate resilient interventions. Typical of ‘sin’ stock, more is expected from the brewer to champion the ‘s’ in ESG.
On the downside global grain market dislocation, taking a negative cue from the war in Eastern Europe, could weigh input costs from elevated wheat and barley prices. Despite supply chain recoveries, pandemic recurrences in key global economies could pose inflationary strains in the distribution chains for the company.
The Kwacha Arbitrageur
