National Foods Holdings Limited reported profit for the six months to December 31, 2018, grew 78 percent to $16,8 million from comparable prior year’s $9,4 million despite a challenging operating environment.
In addition to limited foreign currency for essential imports and plant maintenance, the period was also characterised by rising inflation resulting in prices being adjusted substantially in most categories to maintain viability.
This resulted in reduced volume momentum over the October to December quarter where volumes grew 11,7 percent compared to 18,4 percent for the half year.
Profit before tax for the period jumped 84 percent above same period last year to $21,9 million. Operating profit rose 79 percent to $23 million while basic earnings per share increased 78,6 percent to 24,62 cents.
Volumes grew 18,4 percent over prior period driven by stockfeeds as the poultry sector recovered from the Avian Influenza outbreak as well as maize on the back of a poorer local maize harvest and the fact household maize retentions were reduced on Grain Marketing Board (GMB) prices.
Revenue for the period was 41 percent above prior year comparable period as a result of the volume increase and average selling prices per unit which increased by 19 percent compared to last year.
During the period under review, operational expenditure increased by 58,6 percent to $37,4 million relative to the same period last year.
“Inflationary pressure was evident across all cost lines, particularly those costs with imported content such as plant and vehicle maintenance,” said chairman Todd Moyo.
Capex for the period amounted to $9,76 million which was behind plan due to foreign currency shortages that caused substantial delays in various capital projects that had been planned.
The flour milling division recorded a volumes growth of 3,4 percent compared to last year. Demand for bread flour was unprecedented and the business prioritized supplies to bakers at the expense of pre-packed flour where volumes declined by 40,8 percent.
Moyo said despite prioritizing bakers flour operating at maximum capacity, the group could not meet the demand.
The maize milling division performance improved driven by a 60 percent growth in volume due to affordability of maize compared to other starches as well as poorer local harvests which reduced household retentions.
Stockfeeds recovered by 39 percent compared to prior year which was affected by Avian Influenza outbreak. Volumes in the MCG unit declined by 20 percent compared to last year due to affordability and to a lesser extent salt where disruptions occurred in imported raw material supply on foreign currency shortages.
Snacks and treats grew 28 percent spurred by King Kurls soft snacks and Iris biscuits brands. At Pure Oil, the business had a volumes decline of 21 percent as foreign currency allocations to the edible sector reduced in the period.
The group has continued with its support for contract farming with 10 400 hectares put under various cereals.
NatFoods directly supported production of 9 500 hectares of maize, wheat, soya beans, sugar beans and popcorn through the 2018 winter and 2018-19 summer seasons.
Pure Oil also supported an additional 900 hectares of soya beans in the 2018/19 season.
Foreign currency shortages will remain a challenge for the group as well as the rest of industry and its availability will determine the business environment.
“The resolution of challenges in the provision of foreign currency for imported wheat is essential for the continued sustainability of the flour unit.
“Whilst the group remains committed to continuing to play a meaningful role in the basic food commodities space and broadening its category repertoire, the near term focus must be on resolving the wheat payment issue,” said Moyo