BUSINESS REPORTER
Listed agro-processing firm, National Foods Limited (Natfoods), will spend US$9m on flour mill and breakfast cereal manufacturing equipment as it ramps up production levels in a bid to meet the growing demand.
In a statement accompanying the company’s financial results for the year to June 30,2021 board chairman Todd Moyo (pictured) said the company has approved acquisition of flour mill and cereal manufacturing equipment.
“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$5m and the project is now underway and progressing on schedule with commissioning scheduled for late 2022,” Moyo said.
“The board has approved the acquisition of additional cereal manufacturing equipment at a cost of US$4m which will allow the group to expand its repertoire of breakfast cereals and extruded products.”
In its financial results for the year to June 30,2021, Natfoods revenue increased to ZWL$33.2bn from ZWL$26.4bn, on the back of the volume growth as well as the impact of inflation.
Volumes increased 15% to 525,000 tonnes compared to the prior period and this was achieved in spite of the disappointing result from the maize unit, where volumes declined by 32% largely on the back of intense competition from imported maize meal and the discontinuation of the subsidy programme.
Moyo said excluding maize, the year on year volume growth across all categories was 48% due to improved consumer demand and a steadily improving market presence across the portfolio.
Profit declined 97% decline to ZWL$72.4m during the period under review from ZWL$2.19bn reported in prior year due to the effects of Covid-19 induced lockdown.
Operating expenditure increased by 327% as costs normalised in real terms with the slowing inflation.
Moyo said interest costs increased by 564% to ZWL$389m as the interest rates on local borrowings increased significantly.
Total assets stood at ZWL$15.5bn from ZWL$12.8bn.
Although gearing is moderate the increase in interest rates and lower inflation has meant that working capital models and cash flow management once again become key priorities.
Deposits were paid for both the new Bulawayo Flour mill and the new Cereal project in the latter part of the year and the company is well positioned to continue to fund its pipeline of new projects.
The volumes for the Flour unit increased by 43% compared to the prior year and this growth was achieved on the back of strengthening consumer demand.
While growth occurred in both the baker’s and prepack flour segments, it was especially strong in prepacks as consumers resorted to home baking with the Covid-19 induced lockdowns and movement restrictions in place.
Moyo said the board has approved the implementation of various plant upgrades in the coming year to the Aspindale plant as part of a three-year phased upgrade which will significantly modernise the existing plant which was installed in the early 1990s.
He said Natfoods continues to keenly support contract farming of maize, soya beans, wheat, sugar beans and popcorn.
During the current summer season just over 9,000 hectares were planted with the tonnage harvested amounting to 55,000 tons, mainly of maize.
In addition, 5,800 hectares of wheat have been sown in the current winter crop. This programme is now making a meaningful contribution to the group’s key raw materials.
Despite a difficult operating environment, Natfoods declared a final dividend of ZWL$2.96 per share payable in respect of all ordinary shares of the company.
In the outlook, the groceries unit will be split into two: the down-packed unit (rice, salt, sugar beans and popcorn) and the traded goods unit (pasta, canned products, jam and peanut butter).
In addition, a separate cereals unit has been created to manage the production of cereals and other extruded products, Moyo said.
