Milling giant makes payment for new plant

LISTED milling giant, National Foods Holding Limited has made part payment for its state-of-the-art US$5 million flour milling plant to be installed at the company’s factory in Bulawayo.

The new plant will replace the existing production line at the Basch Street site with the company on record saying the project had been carefully planned to ensure uninterrupted flour supply in the southern region part of the country during the installation phase.

The southern region covers Bulawayo, Midlands, Matabeleland North, Matabeleland South and Masvingo provinces.
In a statement accompanying financial results for the half-year ended June 30, 2021, the diversified agro-industrial concern, said:

“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.”

It is hoped that the said project will be completed by the end of next year.
During the period under review, the group’s volumes increased by 15 percent to 525 000 tonnes compared to the prior period.

This was achieved despite the disappointing results from the maize unit, where volumes declined by 32 percent largely on the back of intense competition from imported maize meal and the discontinuation of the subsidy programme.

“Excluding maize, the year-on-year volume growth across all categories was 48 percent.
This positive outcome was driven by improved consumer demand and a steadily improving market presence across the portfolio.

“Revenue for the period increased to $28,07 billion, a 343 percent increase on the prior period on the back of the volume growth as well as the impact of inflation.”

Profit before tax increased by only 82 percent to $3,42 billion.
This was a muted performance relative to the rate of inflation and was largely caused by lower gross margins across the portfolio, the performance of the maize unit, as well as significant increases in operating expenditure and interest costs.

Gross margins were impacted by the declining inflation, as gains on prepaid raw materials reduced relative to the prior period as well as general pricing restraint in view of the strategic intent to grow volumes in a recovering market.
“The maize unit had a disappointing year, with performance being impacted by the normalisation of the market post the removal of the subsidy scheme as well as a proliferation of cheap imported maize meal, notably from South Africa.
“Operating expenditure increased by 327 percent as costs normalised in real terms with the slowing inflation.
“Interest costs increased by 564 percent to $389 million as the interest rates on local borrowings increased significantly.

“The statement of financial position remains in a healthy position with very moderate levels of gearing, with net debt of only $591 million as at year end.

“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,” said National Foods. — The Chronicle