eBusiness Weekly
Enacy Mapakame
Food processing giant, National Foods Holdings Limited, is projected to maintain solid volume performance supported by strong staples demand.
This is despite a challenging environment worsened by the El-Nino induced drought which will have an adverse impact on agriculture production and subsequently disposable incomes.
The company recently reported solid volume performance for the six months to December 31, 2023, a feat achieved against a backdrop of a volatile and challenging operating environment.
This positive outlook comes as a welcome surprise, considering the El-Nino induced drought gripping the region and a significant decline in the local maize harvest.
Market watchers forecast the Victoria Falls Stock Exchange (VFEX) listed food processing giant to maintain a firm volume performance despite the obtaining challenge.
Brokerage firm IH Securities attributes this projected growth to a multi-pronged strategy. Firstly, the company capitalised on a global downward correction in wheat prices. This allowed them to reduce their own prices, particularly in the bread value chain, which in turn stimulated a 3,4 percent increase in aggregate volumes compared to H124 last year. This growth was not uniform across all segments, but it paints a picture of a company adept at adapting to market fluctuations.
The stockfeed division, for instance, thrived with a 14 percent volume increase, likely fuelled by strong performances in the poultry and beef categories. The flour unit also saw a healthy 5 percent rise, directly benefiting from the lower wheat prices.
“We are of the view that whilst consumer liquidity might be constrained 2H24 due to down trending performances in the agriculture and mining sectors, National Foods aggregate volumes are forecast to stay in the positive anchored by their defensive staple offering,” said IH Securities.
“National Foods has continued with its ongoing capacity expansion initiatives, thereby providing further volumes potential for the group. The company commissioned the country’s first large scale pasta line in February 2024 whilst other investments in the pipeline include a new biscuit line which will extend the product portfolio to specialised biscuits such as creams, and ongoing work to add to the stockfeed manufacturing platform capacity.
“Strategic focus for management in the current financial year will be on optimizing the performance of the new investments,” said the research firm.
While other segments like maize and biscuits went down 9,5 percent and 27 percent respectively, due to the drought and other factors, National Foods isn’t shying away from challenges. The company is leveraging its strong financial position to implement an import program for grain, aiming to supplement the local harvest and ensure a consistent supply of raw materials.
This proactive approach is expected to lead to a modest recovery in the maize segment according to experts.
Additionally, National Foods isn’t just reacting to the current environment; they are also proactively building for the future. The company recently commissioned the country’s first large-scale pasta line, a significant investment that reflects their commitment to innovation and market expansion. This is not a standalone project; further investments are planned, including a new biscuit line that will broaden their product portfolio with specialised offerings like cream-filled biscuits.
Additionally, ongoing work to expand their stockfeed manufacturing platform capacity indicates a strategic focus on high-performing segments. Management has clearly identified areas for growth and is taking concrete steps to capitalize on those opportunities.
While the second half of 2024 might present challenges due to potential constraints on consumer spending due to decline in disposable income within the agriculture sector and dampen overall demand, National Foods remains optimistic.
Their focus on optimising the performance of their new investments, particularly the recently commissioned pasta line, is expected to contribute to continued volume growth while consumers are also more likely to maintain spending on necessities like flour and stockfeed, even in a difficult economic climate.
