NatFoods plans $7m capital expenditure

HARARE - National Foods Holdings Limited (NatFoods) plans to spend $7 million in the eight months to June 2014 on plant renovations as part of strategies to bolster capacity and unlock shareholder value.

Todd Moyo, the group’s chairperson, said the listed milling and stock feeds producer will continue to develop all aspects of the business to maintain its market share.

“The increase in volumes sold… necessitates further upgrades of plant and equipment and investment into our people. To this end, we will spend about $7 million on capital expenditure in the forthcoming financial year,” he said. This comes as the group’s total volumes sold surged to 489 425 tonnes in the year to June 2013, representing capacity utilisation of 46 percent.

During the period under review, revenue increased to $295,9 million from $234 million spurred by increased capacity utilisation as its strategy to “fix, optimise and grow” gained traction in all core categories.
Profit after tax went up 76 percent to $13,9 million.

The group recorded a 76 percent increase in basic earnings per share to 20,38 cents from 11,55 cents prior year.

Moyo said margins were heavily influenced by international commodity price movements, the length and cost of raw material pipeline, as well as regional competitor activity.

“Accordingly, NatFoods realised margins above expectation in the first half and below expectation in the second half as the world markets moved down and against positions taken,” he said.

Moyo said non-recurring profits of $3,4 million were realised through disposals ($0,8 million) and once off raw material gains ($2,6 million).

“Overall profit before tax achieved of $17,2 million was therefore 61 percent higher than the previous year,” he said.

Moyo noted that net working capital increased by $33,1 million to $46,7 million to fund the increase in volumes produced along with more appropriate on-balance sheet funding structures.

“This change in funding structures had no material impact on earnings per share. Accordingly our net borrowings increased to $16,5 million resulting in a gearing ratio of 27 percent which is within plan,” he said.
“In an effort to modernise the operating platform, the group invested $6,1 million into capital projects and has plans to invest further in key operational areas in the coming year.”

The group’s milling division sold 44 percent more flour in the period under review compared to the prior year due to the introduction of tariffs on imported flour.

Moyo said profitability in the maize milling unit was down 13 percent on the prior year due to subdued volumes and increased competition.

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