Govt subsidy chokes Natfoods
NATIONAL Foods Holdings Ltd (Natfoods) has been negatively affected by the high price offered by the Grain Marketing Board (GMB) for maize, seeing its profit reduced to $13,7 million in the financial year ended June 30 from $14,2 million registered in the prior year.
GMB is buying maize at $390 per tonne, a price other buyers find exorbitant in the market. The price is reported to be the highest in the world as the international price is below $300 per tonne.
“The maize unit was significantly impacted by an increase of subsidised maize provided to consumers by government following the disappointing 2015-16 harvest. In addition, the Grain Marketing Board priced its commercial offering very aggressively, culminating in the maize division recording a loss for the year,” Natfoods chairman Todd Moyo said in a statement accompanying the financial results ending June 30.
The company said profitability was impacted by a poor performance in the maize division which saw the reduction of volumes by 70 000 tonnes.
“Volume performance was disappointing with 506 981 tonnes sold representing a decrease of 10% over prior year.
Profitability was impacted by a very poor result from the maize division where volumes reduced by 70 000 tonnes on last year excluding maize the remainder of the group grew volumes by 7,3% compared to the previous period,” Moyo said.
Natfoods said it continues to engage authorities through the Grain Millers’ Association of Zimbabwe to resolve the structural challenges impacting the maize milling sector.
“Maize milling had a disappointing year, trading at a loss. The group continues to engage authorities through the Grain Millers’ Association to resolve the structural challenges impacting the maize milling sector. Operating models have been modified for the company’s maize mills to reduce costs and opportunities for innovation with the maize category are being pursued,” he said.
Moyo said the ability of the company to settle its foreign creditors remained a key consideration, although with the support of the Reserve Bank of Zimbabwe as well some respite in respect of foreign liquidity on the back of tobacco inflows the company’s position with its foreign creditors normalised by year-end.
According to Natfoods, the increased cost of foreign credit lines placed inflationary pressure on raw material prices.
The company said it consciously moderated pricing and as a result margins were impacted in some categories which use imported raw materials such as flour, where gross margins reduced by 1,5% compared to prior year.
“Several categories including flour and rice, saw volumes increases on the back of government’s policy to reduce imports of finished goods following the implementation of SI 64 of 2016 as well as the common challenges faced across the food sector in accessing foreign currency for raw materials,” he said.
On the flour milling division the company produced solid results for the period, with volumes increasing by 18% compared to last year with growth emanating from the bakers flour category and in particular strong demand from all the major plant bakers who are now sourcing all their flour requirements locally.
“Volume performance for the stock feeds division was muted, declining by 9% on prior year due to reduced protein consumption and the excellent rains which impacted beef feed volumes. Pure Oil business produced an excellent result for the period with attributable profit increasing by 307% to 1,83 million over the period. ZIMGOLD maintained its market leading position in the cooking oil sector and laundry soap under the ZIMBRITE brand was introduced towards the end of period,” Moyo said.–newsday
