Zambia Forestry breaks six-year Lusaka Exchange drought

Tom Minney explains why Zambia Forestry and Forest Industries Corporation’s February listing brought relief to the Lusaka Securities Exchange

Zambia Forestry and Forest Industries Corporation Ltd broke a six-year listing drought and brought welcome relief to the Lusaka Securities Exchange on 12 February. It listed all its 400m shares, after an offer of 160m shares (40%) at ZMW2.06 each to raise ZMW330m ($22.5m). 

Zaffico is Zambia’s biggest company establishing, managing and selling exotic roundwood and manages 51,659 hectares in pine and eucalyptus plantations plus some 50,000 hectares of unplanted land. It sells harvested mature trees as well as poles for transmission, fencing and construction. 

According to the prospectus, dated 6 December, the total share offer included a sale of 90m shares from Zambia’s state-owned Industrial Development Corporation (IDC).

The offer opened on 11 December and was extended eight days but closed on 29 January. The forestry firm will use the proceeds from selling 70m of these shares for working capital, expenses and capital spending. The sponsoring broker is Pangaea Securities.

It was the Lusaka Stock Exchange’s first public offer and listing since Madison Financial Services in mid-2014. 

In the financial year 2018, Zaffico’s revenue was ZMW244.7m ($16.7m, up from $14.3m in 2017); earnings before interest, tax, depreciation and amortisation (EBITDA) were $11.2m ($10.1m in 2017); and net profit was $8.2m ($7.8m in 2017).

Zaffico has also been authorised to sell confiscated rosewood mukula logs and logs harvested before harvesting mukula was banned. In August 2019 it was reported that the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) decided to include mukula trees in its Annex II listing.

Rosewood has a high value in China for making furniture and is being widely harvested across Africa while Zambia has imposed bans and lifted them from time to time.