We have extracted the financial summary from the interim half year report of National Foods Holdings Limited listed on the Zimbabwe Stock Exchange under the share code NTFD.zw. National Foods is one of the largest manufacturers and distributor of food products in Southern Africa.

The following is an excerpt from the interim half year report;

Overview and Financial Performance

The Group recorded a solid performance for the period, posting Profit before Tax of $21.95m which was 84% above the same period last year. EBITDA for the period increased by 77% compared to last year. Volumes grew by 18.4% over the prior period, driven mainly by Stockfeeds as the poultry sector recovered from the Avian Influenza outbreak and Maize on the back of a poorer local maize harvest and the fact that household maize retentions were reduced on account of the attractive GMB price. Volumes in the MCG unit declined by 19% as rice consumption declined markedly due to its relative affordability.

The second half of the period was characterised by a significant increase in inflation. In response pricing regrettably had to be adjusted substantially in most categories in order to maintain viability. These price changes led to reduced volume momentum over the October to December quarter where volumes grew by only 11.7% compared to 18.4% for the half year.

Revenue for the period increased by 41% compared to last year, as a consequence of both the volume increase of 18% and average selling prices per unit which increased by 19.3% versus last year. Operational expenditure increased by 58.6% to $37.4m 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 costs.

The Group’s working capital model changed appreciably over the quarter in response to the prevailing economic situation. Stock increased in value from $41.7m at June 2018 to $66.6m in December 2018 as efforts were made to build inventory of key raw materials which also increased in value. Prepayments increased from $23.5m to $46.4m for the same reason.

During the period an agreement was reached between the Reserve Bank of Zimbabwe and the Group’s major grain supplier wherein the RBZ assumed the Group’s legacy debt to its supplier amounting to $54.9m as part of a funding agreement, which will see this debt being settled over an agreed period. National Foods settled the full amount locally to the Reserve Bank, resulting in a reduction in its creditors. The timely settlement of the legacy wheat position in accordance with the agreed terms is critical to enable the continued and consistent supply of imported wheat into the country. Regrettably, shortly after the period-end the RBZ has had to delay payments on the facility which in turn has disrupted flour supplies to the market. The Group continues to work closely with the RBZ to resolve the matter and remains fully capacitated to produce adequate volumes of flour provided the necessary foreign currency to import wheat is availed. Capital expenditure for the period amounted to $9.76m, well behind plan due to difficulties in sourcing foreign currency which caused substantial delays in the various capital projects that had been planned. The Group will continue to reinvest in improving its operations in line with the availability of foreign currency.

Flour Milling

Volumes for the period grew by 3.4% compared to last year. Demand for bread flour was unprecedented due to the relative affordability of bread and the business decided to prioritise supplies to bakers at the expense of pre-packed flour, where volumes declined by 40.8%. In spite of this and the fact that our mills were operating at maximum capacity, we were unable to satisfy the demand for Bakers flour. The on-going sustainability of this unit will largely be driven by the availability of imported wheat and market related pricing across the flour to bread value chain.

Maize Milling

The Maize division delivered a much-improved result, driven by volume growth of 60% over last year. The volume growth occurred due to the affordability of maize compared to other starches as well as the poorer local maize harvest and reduced household maize retentions. Our new Pearlenta Hi-Fibre and Red Seal Multigrain innovations continue to be well received by the market.


Stockfeed volumes recovered, growing by 39%, as last year was heavily impacted by the Avian Influenza outbreak. Feed prices had to be increased mainly due to the higher prices of imported soya and minerals and vitamins. The consequent knock on effect in protein prices points to more constrained volumes in the second half.


Volumes in this unit were disappointing, declining by 20% compared to last year. The volume reduction was driven mainly by rice due to its affordability and to a lesser extent salt where disruptions occurred in imported raw material supply due to foreign currency shortages.

Snacks and Treats

This unit delivered an excellent performance, with volume growth of 28% driven by the King Kurls soft snacks and Iris biscuits brands. The Group continues to drive a strong innovation agenda in the snacks and treats categories and the coming half will see the launch of additional new products.

Pure Oil

National Foods holds an effective 40% stake in Pure Oil Industries and its results are equity accounted. The business produced a reasonable result for the period, with attributable earnings increasing by 12% versus last year. Foreign currency allocations to the edible oil sector reduced during the period, leading to a decline in oil volumes by 21%.

National Foods Logistics

National Foods Logistics (Natlog) was created in the second half of the previous financial year. Natlog is responsible for the distribution of National Foods’ product to the market and is a joint venture partnering Equity Distribution Services, formerly National Foods’ outsource distribution service provider. 17 new vehicles were commissioned during the period to augment the existing fleet and improve product distribution.

Contract Farming

The Group continues to support local farming, with 10,400 hectares of a variety of cereal crops planted during the year through two substantial contract farming schemes. National Foods directly supported the production of 9,500 hectares of maize, wheat, soya beans, sugar beans and popcorn through the 2018 winter and 2018-19 summer seasons. In addition, Pure Oil has supported an additional 900 hectares of soya beans during the 2018-2019 summer season.

Corporate Social Responsibility (CSR)

The Group’s CSR program supports 41 registered institutions spread across the country’s 10 provinces. CSR support in the half year included cholera pandemic support as well as the provision of medical supplies to the Epilepsy Foundation of Zimbabwe. In the half year, the company earned an award as the “Top Sustainable Company of the Year – 2018” from the CSR Network Zimbabwe for its efforts in uplifting vulnerable communities.

Future Prospects

The period under review witnessed substantial increases in inflation and an overall deterioration in the macro-economic 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.

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