Milling company splits groceries unit

LISTED milling company, National Foods Limited, is splitting its groceries unit into the down-packed and traded goods units while US$4 million has been planned for investment into additional cereal manufacturing plant.

The giant milling company is involved in flour and maize milling, stock feed, and cereal production as well as projects in groceries, snacks and treats and cooking oil manufacturing.
Recently, National Foods announced that it is installing a US$5 million state-of-the-art flour milling plant at its Basch Street factory in Bulawayo.

In its 2021 annual report, National Foods said going into the new financial year, it has taken steps to sharpen accountability at a business unit level in order to become more agile and responsive to the environment.  "As part of this work the company has created additional business units to provide greater focus on several of the growing categories. To this end, the groceries unit will be split into the Down-Packed unit (rice, salt, sugar beans and popcorn) and the Traded Goods unit (pasta, canned products, jam and peanut butter)," it said.

The company said  in addition, a separate cereals unit has been created to manage the production of cereals and other extruded products.

It said its board has since approved the acquisition of additional cereal manufacturing equipment at a cost of US$4 million which will enable the group to expand its repertoire of breakfast cereals and extruded products.

The company said the planned investment was set to avail an exciting range of affordable and nutritious cereals to the market. "It is anticipated that the launch of these products will occur progressively from mid-2022," said National Foods.

The continued stable economic environment has allowed more time for the company to focus on the optimisation of the business models for each category.

The key focus areas for the company will be to identify initiatives, which improve operational efficiencies in order to enhance margins and reduce operational expenditure.

"The management of working capital and cash flow models in the respective units will also be a key priority for our management teams, ensuring that interest costs are at sustainable levels," it said.

The company said in addition to the recently announced capital expenditure projects, it continues to explore a number of opportunities, largely of a forward integration nature.

During the year under review, volumes increased by 15 percent to 525 000 tonnes compared to the prior period. This was achieved despite the disappointing result from the maize unit, where volumes declined by 32 percent largely on the back of intense competition from imported maize meal and the discontinuation of the Government subsidy programme.

Excluding maize, the year-on-year volume growth across all categories was 48 percent.
"This positive outcome was driven by improved consumer demand and a steadily improving market presence across the portfolio.

"Revenue for the period increased to $28,07 billion, a 343 percent increase on the prior period on the back of the volume growth as well as the impact of inflation," said National Foods.

It said profit before tax increased by only 82 percent to $3,42 billion.

"This was a muted performance relative to the rate of inflation and was largely caused by lower gross margins across the portfolio, the performance of the maize unit, as well as significant increases in operating expenditure and interest costs," said the company.

The group's gross margins were impacted by the declining inflation, as gains on prepaid raw materials reduced relative to the prior period as well as general pricing restraint in view of the strategic intent to grow volumes in a recovering market.