Oliver Kazunga, Senior Business Reporter
DIVERSIFIED agro-industrial concern, National Foods is set to install a new state-of-the art US$5 million flour milling plant at the firm’s factory in Bulawayo.
The new plant, whose installation will be completed next year, will replace the existing production line, said the company in a statement accompanying financial results for the half year ended December 31, 2020.
National Foods said the project has been carefully planned to ensure continued flour supply to the southern region during the installation phase.
“The board has approved the purchase of a new state-of-the art flour mill, which will be installed as a replacement for the existing mill at the Bulawayo Basch Street site, at an estimated cost of US$5 million,” it said.
“This significant project has been carefully planned to ensure continuity of flour supply to the southern region during the installation phase, and is expected to be completed by the end of 2022.”
During the period under review, volumes for the flour unit increased by 56 percent compared to the prior period, with solid growth in both the baker’s and prepack flour segments.
Increased consumer demand was driven by pricing stability on the back of support from the foreign currency auction and competitively priced local wheat. On the maize milling division, National Foods said during the period under review volumes were disappointing as they declined by 23 percent relative to prior period, despite the fact that the prior season was a drought year, which ordinarily results in firm demand.
“The decline was due to the market adjustments that took place following the conclusion of the subsidy programme, as well as intense competition from imported maize meal, notably from South Africa.
“Notwithstanding the challenging period of adjustment that took place during the period, the return to a more normal market-based system in the maize category is welcomed.”
In the half-year period, National Foods said its stockfeed division registered a 34 percent increase in volumes when compared to the prior period. This was driven by the poultry category, where volumes increased by 56 percent relative to the prior period.
The company said beef feed volumes were muted, declining by five percent on the back of good early rains and a general reduction in cattle feeding. In the groceries division, the company said volumes increased significantly by 98 percent versus the comparative period.
“The solid growth was achieved across the category portfolio on the back of competitive pricing. Snacks and treats division volumes increased by 57 percent against the prior period.
“As with groceries, the growth occurred across the product portfolio and was particularly pleasing in view of the impact the Covid-19 pandemic has had on the purchase of discretionary items,” said National Foods.
Its cereal instant maize porridge continued to make steady progress in the market and together with “Better Buy Soya Delights”, a soya-based meat substitute, has been well received by the market.
On the cooking oil division, National Foods said, the unit delivered another strong performance, with volumes increasing by 64 percent compared to the same period last year.
As part of supporting the local content policy through the continued supply of raw materials for its operations, the agro-industrial group said, it continues to support contract farming of maize, soya beans, wheat, sugar beans and popcorn.
“During the current summer season just under 9 000 hectares have been planted and given the favourable weather conditions it is anticipated that the programme will make a substantial contribution to our raw material requirements,” it said.
During the period under review, the group’s volumes increased by 25 percent to 264 000 tonnes compared to the prior period, reflective of the firm’s pricing strategy as well as the improved consumer purchasing ability on the back of reduced inflation.
Revenue in comparison to the prior period increased by 766 percent to $12,685 billion, driven by inflation and the progressive removal of subsidies on basic commodities.
“Gross margins for the period at 31 percent illustrated a return to more normalised levels, with the impact of prepaid raw materials declining compared to prior year when inflation rates were higher.
“As a result, gross margin dollars increased by 415 percent, which lagged the increase in revenue. Operational expenditure amounted to $1,958 billion, a 575 percent increase versus the prior period. There were price increases in many key expenditure lines such as electricity, fuel and staff costs during the period as subsidies were removed and inflationary lag moderated,” said National Foods.
Profit before tax for the period increased by 395 percent to $2,340 billion, and was largely impacted by the normalisation in both gross margins and operating costs.
“The reduced inflation necessitated a review of the working capital models of the various units, particularly in view of the relatively high cost of local borrowings.
“To this end, prepaid stock pipelines were reduced and customer credit was increased to drive revenue,” it said. — @okazunga.