RBZ,Nat Foods strikes a deal

DIVERSIFIED milling firm, National Foods Limited, says it has struck a deal with the Reserve Bank of Zimbabwe to assume its legacy debt amounting to $54,9 million owed to one of its major grain suppliers.

In a statement accompanying the company's financial results for the half year period ended 31 December 2018, group chairman Mr Todd Moyo said the arrangement was part of a funding agreement, which would see the debt being settled over an agreed period of time.

"During the period an agreement was reached between the Reserve Bank of Zimbabwe (RBZ) and the group's major grain supplier wherein the RBZ assumed the group's legacy debt to its supplier amounting to $54,9 million," he said.

"National Foods settled the full amount locally to the Reserve Bank, resulting in a reduction in its creditors."

It is hoped that 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 ended, 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," said Mr Moyo.

During the period under review, the group's working capital model changed appreciably over the quarter in response to the prevailing economic situation.

Stock increased in value from $41,7 million as at June 2018 to $66,6 million in December 2018 as efforts were made to rebuild inventory in key raw materials, which also increased in value. Prepayments increased from $23,5 million to $46,4 million for the same season.

In the period under review, the group recorded solid performance, posting profit before tax of $21,95 million, which was 84 percent above the same period last year.

"Revenue increased by 41 percent compared to last year as a consequence of both the volume increase of 18 percent and average selling prices per unit, which increased by 19,3 percent versus last year.  

"Operational expenditure increased by 58,6 percent to $37,4 million relative to the same period. Inflationary pressure was evident across all cost lines, particularly the costs with imported content such as plant and vehicle maintenance costs," he said.

The group's capital expenditure for the period amounted to $9,76 million, well behind due to difficulties in sourcing foreign currency, which caused substantial delays in the various capital projects that had been planned.

Mr Moyo said the group would continue reinvesting in improving its operations in line with the availability of foreign currency. The group's divisions such as flour milling, maize milling, stockfeed, snacks  and treats posted good results during the period.

Mr Moyo said the group would continue supporting local contract farming with 10 400 hectares of a variety of cereal crops planted during the year through substantial contract farming schemes.

"National Foods directly supported the production of 9 500ha of maize, wheat, soya beans, sugar beans and popcorn through the 2018 winter and 2018/19 summer seasons," he said.