NATIONAL Foods Limited says its core, established business units delivered a solid performance for the six months ended December 31, 2023 placing the group’s financial position in an extremely solid trajectory, closing the period at US$22,9 million.
It said the investment in working capital was reduced significantly on the back of a return of creditor funding.
The key focus for management in the period ahead will be to ensure that recent investments perform to expectation.
Over the years National Foods has embarked on a growth strategy with entry into a number of new categories as well as significant investments into existing categories. The milling company is involved in flour and maize milling, stock feed and cereal production, as well as projects in groceries, snacks and treats and cooking oil manufacturing.
The company is the country’s largest food manufacturer, producing a broad range of fast-moving consumer goods, as well as animal feed with an international distribution network.
In an abridged group financial results, Independent Non-Executive chairman, Mr Edwin Isaac Manikai, said the new investments usher in a new and exciting dimension for the firm as it looks forward to adding several innovative, world-class products to its portfolio.
Mr Manikai said volumes for the current period under review amounted to 285 000 tons, 3,4 percent above the comparative period, with growth emanating from the Stockfeeds, and to a lesser extent, flour divisions.
These gains, he said, were offset by losses in rice volumes, following the banning of exports out of India, which in turn led to a significant increase in global prices.
Revenue increased by 3,3 percent to US$172 million, with the moderate increase being largely volume-related.
Gross profit dollars decreased by 2,1 percent, US$784 000 in absolute terms, as pricing was moderated to maintain volume momentum.
“Operating costs, which continued to re-base in real terms, increased by 7,9 percent to US$25,7 million, driven mainly by power (both from the grid and generators), repairs and maintenance and higher wages at factory floor level.
“As a result, operating profit before depreciation, financial loss, interest, equity accounted earnings and tax at US$11 million was 21 percent below the comparative period,” said Mr Manikai.
He noted a substantial reduction in interest costs, which declined from US$3,3 million in the comparative period to US$0,9 million. The comparative period was heavily impacted by the sudden and extreme, increase of local currency interest.
He said these factors drove the Group’s current period Profit Before Tax to US$9,60m, an increase of 56 percent over the comparative period.
“The Group’s statement of financial position remained extremely solid. The investment in working capital reduced significantly on the back of a return of creditor funding, closing the period at US$22,9 million.”
Flour Milling Current period volumes for the Flour unit increased by five percent over the comparative period; this volume growth was largely driven by lower wheat pricing, which in turn lowered flour pricing.
National Foods continues to be a key off-taker of the 2023 local wheat harvest, having purchased in excess of 60 000 tons to date, with most of this volume having been procured from the A Growth contract farming scheme.
Stockfeed volumes continued to show encouraging growth, closing 14 percent above the comparative period, on the back of strong performances in the poultry and beef categories.
Additional investment to improve the efficiency of the manufacturing platform will be undertaken in the period ahead, noted Mr Manikai.
However, milling Maize volumes were disappointing, declining by 9,5 percent over the comparative period but showed recovery toward the end of the current period under review.
Mr Manikai said the firm has a substantial import programme in place for raw maize, and it is expected that supplies to the market will be consistent for the foreseeable future.
In the period under review, cereal volumes grew by seven percent over the comparative period, notwithstanding the compressed trading in the modern retail channel.
“We have developed an exciting product portfolio in this division and management is focusing on enhancing route-to-market initiatives to maintain the positive volume trend,” he said.
There was a 27 percent decline in the biscuits unit against the comparative period.
“This was a period of transition for the unit, with good progress made in the construction of the new manufacturing plant, which is expected to be commissioned in April 2024. The new plant will result in an exciting new range of biscuits being launched into the market.”
Turning to the pasta unit, volumes for the period increased by 11 percent over the comparative period. Similar to the biscuits division, Mr Manikai noted that the pasta unit was in a period of transition, as the new plant was commissioned in February 2024.
The US$6m plant is the first-ever large-scale pasta line to have been commissioned in Zimbabwe, localising production of this growing category, as well as value-adding local wheat.
The plant is expected to produce 16 000 tonnes of pasta annually.
Pasta is a type of food typically made from an unleavened dough of wheat flour mixed with water or eggs, and formed into sheets or other shapes, then cooked by boiling or baking.
Rice flour, or legumes such as beans or lentils, are sometimes used in place of wheat flour to yield a different taste and fixture, or as a gluten-free alternative. – Chronicle
