eBusiness Weekly
Tawanda Musarurwa
Inflationary pressures had a significant impact on National Foods Limited’s imported products in the year-to-date, although profitability for the period remained in line with expectations on the back of general product demand.
Addressing the group’s annual general meeting (AGM) earlier this week, Natfoods chief executive Michael Lashbrook, said this had resulted in prices increase across its product range.
“Unfortunately this has resulted in price increases across the basket of goods we produce,” he said.
The country’s annual rate of inflation has gradually increased over the past few months on the back of the parallel foreign currency market and three-tier pricing.
Nevertheless, Natfoods’ profitability for the period managed to “meet expectations”.
According to Lashbrook, first quarter volumes improved by 25,6 percent from the prior comparable period on the back of “robust consumer demand”.
Management largely attributed the improved volumes to a 55 percent increase in maize volumes, which can be attributed to lower maize harvest.
This is due to the fact that during drought seasons, smaller maize farmers tend to prefer harvest to the Grain Marketing Board (GMB) rather than retaining for personal consumption.”
Stock feed volumes were up 44 percent from the prior comparable period, due to recoveries at Irvines.
And the snack and biscuits segment grew 48 percent year-on-year while the flour mills were operating at maximum capacity.
Lashbrook said the company continues to liaise with the Reserve Bank of Zimbabwe for foreign currency allocations, in view of its huge import bill.
The company has also embarked on an import substitution programme for its grain requirements, and this year, the company’s contract farming scheme has expanded to 9 000 hectares for maize, sugar beans, soya beans and popcorn.
The CEO said product supply during the period has been largely consistent in most categories, although supplies of some products which use imported raw materials, such as cooking oil and salt, have been impacted by foreign currency availability.
Analysts at Akribos Research Services say in view of the stated trading update, they are bullish for the firm’s prospects going forward.
“We are bullish of National Foods’ performance for FY2019. The company has previously indicated that they have their maize requirement for the year, which will likely last them until first quarter of 2020.
“In addition, National Foods has enough wheat stocks till Christmas, which will allow them to stay in business till then. However, despite rising costs, the company’s ability to raise costs for some products (for example, wheat, a major component in bread whose price is largely controlled) will likely keep margins under pressure in the interim,” they said.
