Local research firm IH Securities projects that National Foods (NatFoods) will maintain a positive growth trajectory in FY24, driven by its resilient staple food offerings.
In its Zimbabwe Agriculture Sector Report, IH Securities forecasts a 1% year-on-year (y/y) increase in NatFoods’ topline, reaching US$348 million in FY24.
This outlook comes amid concerns over the impact of the El Niño weather phenomenon on Zimbabwe’s agricultural sector during the 2023/24 farming season. However, NatFoods’ ongoing capacity expansion initiatives are expected to bolster its volume potential, according to IH Securities.
“National Foods has continued its capacity expansion, offering further volume potential for the group. We estimate NatFoods’ topline will grow 1% y/y to US$348 million in FY24,” IH Securities stated.
Despite recent challenges such as the January 2024 changes to value-added tax, which increased production costs, the first half of FY24 saw some relief in the form of a global wheat price correction. This reduction in wheat prices has allowed NatFoods to reduce costs, particularly in the bread value chain.
Aggregate volumes for NatFoods saw a 3.4% increase compared to the previous year, reaching 285,000 tonnes. The stockfeed division led the charge, with volumes up by 14%, driven by strong performances in the poultry and beef segments.
IH Securities also noted that while drought conditions affected yields, a modest recovery in NatFoods’ maize segment is anticipated due to government policy allowing private grain imports to supplement local harvests.
“The government has allowed millers to privately import grain to mitigate the impact of El Niño. National Foods plans to leverage its balance sheet to implement an import program, ensuring a steady supply of raw materials,” the report said.
IH Securities cautioned that the effects of El Niño would likely persist in Zimbabwe, even as climatologists predict the onset of La Niña conditions in late 2024, which could bring heavy rains to southern Africa from December 2024 to August 2025.
“The long-term impact of El Niño on food security is expected to last until March 2025, according to ReliefWeb’s August update. The government has begun preparations for the 2024/25 cropping season, budgeting ZWG22 billion, with 40% funded by the Presidential Inputs Program,” the report added.
In terms of national agricultural output, the Ministry of Lands, Agriculture, Fisheries, Water, and Rural Development is targeting a total cereal production of 3.2 million tonnes, with a planned increase in hectarage to 2.5 million hectares. Small grain yields are expected to rise from 180kg/ha to 800kg/ha post-drought.
Maize production is projected to increase to 2.7 million tonnes, with yields improving from 0.8 tonnes per hectare to 1.5 tonnes per hectare.
In the livestock sector, the government’s 2024/25 plan aims to expand the beef cattle herd to 5.80 million, up from 5.72 million in the 2023/24 season. Goat numbers are expected to rise to 5.24 million from 5.09 million, and milk production is forecasted to grow to 115 million litres, up from 99.82 million litres.
IH Securities praised the government’s decision to allow duty-free maize imports, which is expected to ease the current supply deficit and help stabilize both consumer and manufacturing sectors.