National Foods defies odds, delivers profit surge ...

National Foods defies odds, delivers profit surge despite Zimbabwe’s challenges

Nyashadzashe Ndoro

National Foods Ltd. weathered a complex operating environment in Zimbabwe to achieve profit growth for the six months ended December 31, 2023.

The company reported a 56% increase in Profit Before Tax compared to the same period last year.

This positive performance comes despite several hurdles. The multi-currency system, a critical factor in economic stability, was extended until 2030, providing some relief. However, distortions in formal retail pricing continue, posing difficulties for consumers.

“Pricing distortions persisted in the formal retail sector, making this channel increasingly less relevant to consumers. We are hopeful that the relevant stakeholders will find a solution to this issue, so that the sector may continue to play a key role in serving the Zimbabwean consumer,” the company noted.

The group noted that while international wheat prices offered some relief after initially spiking due to the war in Eastern Europe, higher maize and rice prices offset any gains. NFL notes that a positive local wheat harvest provided a bright spot, but the ongoing drought threatens future harvests, requiring strategic planning.

New Value Added Tax regulations further strained operations while flour, maize meal, and other staples transitioned from zero-rated to exempt status, impacting production costs. NFL says it is actively managing these costs to minimise the price impact for consumers.

Power outages and significant cost increases also presented challenges. The company, however, believes these higher costs will ultimately lead to a more sustainable power supply in the long run.

Despite these obstacles, NFL saw volume growth of 3.4% compared to the prior year, driven by the Stockfeed and Flour divisions. Revenue rose modestly, reflecting the volume gains. Although gross profit dipped slightly due to price moderation, a substantial reduction in interest expense propelled Profit Before Tax upwards.

The company’s financial position remains strong, with a significant decrease in working capital investment. NFL expressed optimism about navigating the complex economic landscape and ensuring consistent product supply in the coming year.