Govt Subsidy Weigh Down Natfoods Profits

Zimbabwe Stock Exchange listed company, National Foods Holdings Limited has recorded a subdued performance for the year ended 30 June 2017 after posting a profit before tax of $17.23 million- 9.5% down compared to the same period last year due to the introduction of maize subsidies on consumers by the government following a poor 20/16 harvests.

National Foods Group Chairperson, Todd Moyo said volume performance during the reporting period were disappointing with 506,981 tons sold representing a decrease of 10% over prior year.

“Volume performance was disappointing with 506,981 tons 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 tons on last year; excluding Maize the remainder of the Group grew volumes by 7.3% compared to the previous period.

“The Maize unit was significantly impacted by an increase of subsidized 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,” said Moyo.

He added that the ability of the Company to settle its foreign creditors remained a key consideration.

“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 as 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.

“The increased cost of foreign credit lines placed inflationary pressure on raw material prices, the Group 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 volume 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,” said Moyo.

Meanwhile the Board declared a final dividend of 5.21 US cents per share payable in respect of all ordinary shares of the Company.

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