Harare- The Zambia Forestry and Forest Industries Corporation has seen a headline profit decline of 30%, from ZMW 738 million to ZMW 514 million for the year ended 31 December 2025 due to lower fair value gain on biological assets in 2025 compared to an exceptionally large one in 2024.

However, stripping that non-cash item out, the business grew actual revenue by 39%, expanded its asset base, completed a major infrastructure investment, and ended the year with ten times more cash than it started with.

Revenue rose from ZMW 332 million to ZMW 460 million, a 39% increase that the Corporation attributes to heightened customer demand for treated poles during the year. Treated poles are ZAFFICO's primary commercial product, supplying the construction, electricity distribution, and telecommunications sectors across Zambia and the region.

A 39% revenue increase in a single year is not incremental growth, it reflects either a material expansion in volumes, a significant shift in pricing, or both. The gross profit margin held at approximately 63%, consistent with the prior year, which confirms that the revenue growth was not achieved by cutting prices.

ZAFFICO sold more at similar margins, which is the right kind of growth.

The profit decline from ZMW 738 million to ZMW 514 million is almost entirely explained by a single line item, the change in fair value of biological assets. In 2024, this non-cash accounting gain contributed ZMW 1,005 million to the profit before tax line, an exceptionally large revaluation reflecting the appreciation of ZAFFICO's standing timber inventory against prevailing market and growth assumptions.

In 2025, that same fair value gain came in at ZMW 682 million, still substantial, but ZMW 323 million lower than the prior year. That difference alone accounts for the entire profit decline and then some.

The underlying operating business, revenue, gross profit, cost management,  performed better in 2025 than in 2024. The reported profit is lower because a non-cash accounting entry was smaller. That is a distinction with real importance for any investor reading these results.

Total assets grew from ZMW 8,526 million to ZMW 9,577 million, an increase of ZMW 1,051 million or approximately 12%. Biological assets, standing plantation timber, remain by far the dominant asset class at ZMW 8,511 million, representing nearly 89% of total assets. This concentration is inherent to a forestry business model: the value sits in the trees.

Property, plant, and equipment grew from ZMW 406 million to ZMW 524 million, reflecting the capital investment programme ZAFFICO has been executing, specifically the completion of the sawmill factory and the commencement of the particle board facility. Shareholders' funds rose from ZMW 7,485 million to ZMW 7,996 million, driven by the year's retained profit.

Meanwhile, operating activities generated a net cash outflow of ZMW 44 million, a reversal from the ZMW 11 million inflow in 2024. This is a function of working capital dynamics as the business scales and manages plantation expenditure cycles, and is not unusual for an agribusiness or forestry operation in a capital-intensive growth phase.

The more significant number is the ZMW 475 million inflow from financing activities, almost all of which represents the Sustainable Resilient Fund loan facility drawn down to finance the construction of value addition facilities. The result is a closing cash position of ZMW 312 million compared to just ZMW 32 million at the start of the year, a transformation in the liquidity position that gives the Corporation meaningful operational flexibility heading into 2026.

The strategic pivot toward value addition is the most consequential development in ZAFFICO's 2025 narrative, and it is one that carries direct relevance for the broader regional forestry and timber market, including Zimbabwe's. For most of its operational history, ZAFFICO's commercial model has been centred on the sale of treated poles, a product with a relatively short value chain from tree to market. The completion of the sawmill factory and the commencement of the particle board facility represent a deliberate move up that value chain, from raw and semi-processed timber toward finished wood products that command significantly higher margins and open access to construction, furniture manufacturing, and industrial markets that treated poles do not address.

This trajectory is directly comparable to the strategic challenge facing Zimbabwe's own forestry sector. Zimbabwe holds significant pine and eucalyptus plantation assets, primarily in the Eastern Highlands, and has historically been an exporter of timber and related products to the region. However, Zimbabwe's timber value addition infrastructure has remained underdeveloped, constrained by capital shortfalls, power supply unreliability, and the same preference for primary product sales over downstream processing that ZAFFICO is now moving away from.

The lesson from ZAFFICO's capital allocation in 2025, a sawmill completed, a particle board plant underway, a ZMW 475 million loan facility secured specifically for value addition is that the transition from timber exporter to wood product manufacturer requires deliberate, funded infrastructure investment and the willingness to absorb short-term cash outflows for long-term margin improvement.

Operating expenses increased from ZMW 519 million to ZMW 567 million, a rise of approximately 9% due to inflationary cost adjustments and the introduction of new business activities, with expenditure directed primarily toward plantation management and expansion.

A 9% increase in operating costs against a 39% increase in revenue is a favourable cost-to-revenue dynamic, the business is scaling faster than its cost base, which is the right direction for an operation in growth mode. The Corporation has also signalled staff rationalisation as part of a cost optimisation programme aimed at improving productivity and morale, which suggests management is actively managing the overhead structure rather than allowing it to drift upward with revenue.

The outlook from ZAFFICO's board is constructive and specific, which is more valuable than generic statements of intent. The sawmill is complete and expected to contribute to future revenue. The particle board factory is under construction, and the Corporation has explicitly committed to mechanisation, digitalisation, and automation as the operational infrastructure for its next growth phase. These are investments in productive capacity and cost efficiency simultaneously, the kind of capital allocation that tends to compound returns in a natural resource business over time. 

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