NatFoods seeks nod for share buyback

HARARE - National Foods Holdings (NatFoods) is seeking shareholder approval to embark on a share buyback in an effort to boost its share price.

The agro-processing firm, which has been one of the worst performing counters on the Zimbabwe Stock Exchange (ZSE) this year, will next month hold its Annual General Meeting (AGM) to get the approval.

“In terms of this resolution, the directors are seeking authority to allow use of the company’s available cash resources to purchase its own shares in the market,” the company said last week in a circular to shareholders.

A share buyback is a programme by which a company repurchases its own shares from the marketplace, usually because management thinks the shares are undervalued, and thereby reducing the number of outstanding shares.

“The directors will only exercise the authority if they believe that to do so would be in the best interests of shareholders generally. In exercising this authority the directors will duly take into account following such repurchase, the ability of the company to be able to pay its debts in the ordinary course of business, the maintenance of an excess of assets over liabilities, and for the company and the group, the adequacy of ordinary capital and reserves as well as working capital,” NatFoods added.

Although the listed firm’s stock price has been recovering since July, it is still one of the 10 worst performers on the local bourse this year, with a year-to-date (YTD) gain of less than one percent.

The ZSE All Share has been in YTD gains of 65 percent after a crisis-fuelled record shattering rally over the past few weeks which saw the market reaching its highest ever market capitalisation of $23 billion.

Meanwhile, NatFoods said its profit margins suffered after it failed to raise prices in alignment with inflation developments in Zimbabwe during the year ended June 2018.

The group however recorded a reasonable performance for the period, posting a profit before tax of $21,21 million which was 23 percent above the same period last year.

Operating profit for the period increased by 14 percent compared to last year, weighed down by “a very disappointing performance from the flour division”, despite the record flour volumes achieved during the period.

Overall, the group’s profit after tax was up by 25 percent to $17 million, from $13 million in the comparable period in 2017. — The Financial Gazette

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