Removal of subsidies spurs Natfoods


National Foods Holdings Limited (Natfoods) profit for the full year ended June 30 2020 has soared 75% to ZWL$1.58bn from ZWL$906.04m posted during the same period last year fuelled by a growth in revenue on higher prices after the removal of grain subsidies.

The growth in net earnings comes at a time a number of local companies are grappling with high inflation and effects of the Covid-19 pandemic which affected the movement of people and goods during the lockdown period.

Natfoods board chairman Todd Moyo said the management and funding of raw material pipelines remained a key priority, both in view of the constrained local liquidity as well as the extended lead times brought about by the Covid-19 pandemic.

“The group’s profit after tax increased by 75% to ZWL$1.58bn in 2020 from ZWL$906.04m attributable to equity holders of the parent.

Revenue however increased by 52% to ZWL$12.79bn, reflective of higher selling prices following the progressive removal of most grain subsidies,” he said.

Moyo said gross margin dollars increased by 48%, below the increase in revenue as the group focused on competitively pricing its products.

Operational expenditure increased by 45% compared to last year, with the optimisation of the group’s cost structures remaining a key priority.

Volumes for the period declined by 25.3% to 456,000 tonnes compared to the same period last year.

While there were year-on-year volume declines across all categories, the quarterly volume trend during the year was largely stable, with the exception of seasonal variations in the maize division.

Moyo said the group continued to focus on protection of its balance sheet in view of the prevailing inflationary environment.

As a result of these efforts, the group currently has adequate pipelines of all key raw materials to trade sustainably in the year ahead.

He said the flour milling volumes for the flour unit reduced by 35% compared to the prior period, as the significant subsidies which existed last year were removed.

These subsidies were removed mid-way through last year and since that point flour volumes have largely stabilised, the company said.

Performance of the prepack flour segment was firm, with volumes increasing 9% over last year due to increased home baking during the Covid-19 lock-down.

Natfoods said maize meal volumes remained firm, declining by 5% on last year’s high base.

There was a loss in volume momentum in the last quarter as the subsidy program was progressively reduced and maize from the local harvest became available.

Stockfeed volumes declined by 25% versus last year, a decline that was in line with the overall market performance.

Feed prices increased in line with the removal of subsidies on maize and this, together, with constrained demand for protein products led to the reduction in demand.

Groceries volumes in this division declined 22% compared to the prior period. This was largely driven by a reduced demand in the rice category on the back of affordability.

The Natfoods board declared a final dividend of ZWL$4.4571 per share payable in respect of all ordinary shares in the company.

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