National Foods projects 2 percent top-line growth

GIANT agro-processing company National Foods Limited (NFL) massive infrastructure investments are expected to increase capacity leading to a two percent top-line growth year on year to US$350 million in FY24, Equities research and advisory firm, IH Securities has noted.

IH Securities forecast an earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$23,50 million to FY24 representing a margin of 6,7 percent.

The research group noted that the installation of the new pasta line in Harare is on track and the line is expected to be commissioned late in 2023, making it the only large-scale pasta line in the country.

“National Foods has continued with its ongoing capacity expansion initiatives, thereby providing further volumes potential for the Group. As per the company, the installation of the new pasta line in Harare is on track and the line is expected to be commissioned late in 2023, making it the only large-scale pasta line in the country.

“Investments in the pipeline include a new biscuit line which will extend the product portfolio to specialised biscuits such as creams, a US$5,3 million upgrade of the Harare rice plant, and further investment of US$1,5 million in the hard snacks category.

“Strategic focus for management in the current financial year will be on optimising operating efficiencies and product quality.”

The milling company is involved in flour and maize milling, stock feed, and cereal production, as well as projects in groceries, snacks and treats, and cooking oil manufacturing.

According to the World Bank, wheat prices are scheduled to ease 17 percent this year as global wheat production scales up to 800 million metric tonnes on permissible conditions in key producer markets.

The local wheat harvest is forecast to be in surplus for a second year, which will aid in further normalisation of commodity prices and availability.

“In this regard, we expect recovery in demand for flour by-products from improved pricing points. Additionally, the recently commissioned Buhler mill in Bulawayo has gone into increasing flour milling capacity for National Foods.

“In the maize category, despite El Nino weather conditions pointing to possibly a lower domestic harvest and sales upside for National Foods, we, however, expect marginal uplift of volumes in the category weighed down by the continued suspension of import duty on basic goods,” it said.

The group said bread consumption was consequently impacted as prices rose above the US$1 per loaf price resulting in consumers switching to better-priced starches such as rice.

As a result, bread volumes slowed 3,7 percent relative to the same period last year.

Maize volumes declined an aggregate of 9,4 percent year-on-year due to pricing distortions and the duty-free proclamation on basic goods.

Stockfeed volumes posted a 10 percent increase compared to FY22 bolstered by demand in the poultry, beef and dairy sectors while rice volume growth continued to be largely driven by the informal sector, and likely benefited from consumers substituting from pricier bread.

The snacks division grew 25 percent as both hard snacks and soft snacks saw improved sales and capacity enhancements came on stream.

Biscuit volumes, however, slid 1,8 percent when compared to the same period last year due to pricing pressures of flour while cereals volumes in the market grew 47 percent.-chrnicle