eBusiness Weekly
Enacy Mapakame
Food processing giant, National Foods Holdings Limited, is expected to see a continued volumes recovery in the financial year 2022, according to analysts’ forecasts. The growth will come from the anticipated increased demand during the festive season, which is generally characterised by increased consumer spending.
For the just ended FY21, Natfoods overall volumes rose 15 percent on prior year, but was slowed by the maize segment, which went down 32 percent largely on the back of intense competition from imported maize meal and the discontinuation of the subsidy programme and proliferation of cheap imports.
Stockbrokers, IH Securities, however, see a maintained recovery in this current financial year which will be supported by a more stable economic environment with economic activity gradually improving as the country relaxes Covid-19 induced lockdowns.
“Heading into 1H22, we foresee a maintained volumes recovery path for National Foods on account of a relatively more enabling environment. We believe that increasing consumer liquidity combined with the festive season demand and specialisation of business units will positively impact volumes growth for the company’s discretionary goods segments.
“Volumes sold in the maize segment are, however, likely to remain weak in the short term due to flooding of the product on the domestic market from the bumper harvest. Government has since moved to ban imports of maize and products to support the local industry whilst management has since remodelled the business model for the maize unit to ensure that it continues to make a sustainable contribution,” said IH Securities.
The group is expected to enjoy benefits of enhanced efficiency as the board approved the purchase of a new state-of-the-art flour mill, which will be installed as a replacement for the existing mill at the Bulawayo Basch Street site, at an estimated cost of US$5 million.
The new flour mill is expected to be commissioned late 2022 and is set to contribute to increased efficiencies in FY23 going forward.
IH Securities forecast revenue for the group to increase by 68 percent to $47,2 billion for FY22, from $28,07 recorded in the prior year.
Net income is forecast to close the year at $3,8 billion from $2,6 billion while earnings per share is projected to reach $56 from $38 recorded in the previous year.
IH Said: “Lowered margins for the group at full year are still above historical averages so we anticipate further correction and normalization as we head to FY22. We have, therefore, forecasted EBITDA margin to ease from 11,7 percent in FY21 to circa 10 percent in FY22.
“We, however, acknowledge that another run in inflation numbers will see margins surging again due to the sizeable pre-payments made to secure a steady supply pipeline.”
Management at Natfoods highlighted its key focus areas going forward are improving operational efficiencies, management of working capital and cash flow models and ensuring interest costs are kept at sustainable levels.
Group chairman Todd Moyo said: “The company continues to explore a number of opportunities, largely of a forward integration nature. In summary, National Foods is optimistic at the current trajectory of the economy and is taking a number of proactive initiatives to further develop and grow the business in line with the improved circumstances.”
