National Foods in share buy-back

HARARE - National Foods Holdings Limited (NFHL) is seeking authority to have a share buy-back at a price that will not exceed 10 percent of the firm’s issued ordinary share capital on its Annual General Meeting set for early next month.

“A press announcement will be published as soon as the company has acquired ordinary shares constituting on the cumulative basis in the period between the annual general meetings, three percent of the number of ordinary shares in issue prior to the acquisition,” said the firm in a statement yesterday.

Zimbabwe Stock Exchange’s (ZSE) listing rules say that any share buy backs should not be done at a price which is above five percent of the weighted average of the market price.

The food processing firm added that the maximum and minimum prices at which such ordinary shares maybe acquired will be the weighted average of the market price at which such ordinary shares are traded on the local bourse.

This will be determined over the five days immediately preceding the date of purchase of such ordinary shares by the company.

Since dollarisation in 2009, more companies have taken a keen interest in share buybacks and this usually requires a strong cash position against a background of liquidity crunch obtaining in the economy.

A share buy-back is when a company buys back its own shares from the stock market, reducing the number of outstanding shares.

A company can repurchase its own stock by distributing cash to existing shareholders in exchange for a fraction of the company’s outstanding equity that is, cash is exchanged for a reduction in the number of shares outstanding.

The company either retires the repurchased shares or keeps them as treasury stock, available for re-issuance.

This increases earnings per share and tends to enhance the market value of the remaining shares.

Analysts contend that the motivation of embarking on a share buyback scheme seems to be driven by the desire to reward shareholders or clean up the share register of odd lots.

NFHL recorded a 23,6 percent growth in after-tax profit to $7,9 million in the year to June 2012.

Earnings per share went up 57 percent to $11,55 during the period under review.

The firm said the performance was driven by a 15 percent growth in volumes, better operational efficiencies and focus on the core business.

Group revenue surged 16 percent to $234 million from $201 million.

Todd Moyo, NFHL chairperson, said the group benefited hugely from the turnaround in the maize division.

He said flour and stockfeeds showed an improved recovery in the last quarter and was expected to continue into the following year.

“Turnaround strategies are in place to revamp and improve performance in the Fast Moving Consumer Goods (FMCG) division and these include streamlining distribution costs, reducing the interest burden and developing category plans which should hopefully spur volumes in the coming financial year,” Moyo said.

From 2009, NFHL’s focus was to establish a competent manufacturing base and to compete for market share with nationwide distribution capability and keenly-priced products.

The group declared a final dividend of $1,55. - Kudzai Chawafambira

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