National Foods expects 86% revenue growth

BY TAFADZWA MHLANGA

if the economic environment remains unstable by the year ending March 31, 2020, National Foods Holdings Limited (NFHL) expects an 84,6% revenue growth to $1,05 billion spurred by inflationary pressure that is currently pushing up prices.

This comes as the company’s revenue increased 90% to $566 million compared to the previous financial year (FY)’s $297 000 million due to the inflationary-driven price increases.
“We forecast revenue growth of 84,6% to $1,05bn in FY20, with inflationary pressure causing run-rate in pricing. We anticipate that inflationary pressures will catalyse revenue uplift from higher product pricing,” said NFHL.

FY19 commenced on April 1, 2019 and ended on June 30, 2019 and FY20 are the 12 months ending at March 31, 2020.

NFHL also expects gross profit margin to reduce from 33,9% recorded in FY19 to 25,5% in FY20 with the before tax profit margins declining from 14,5% recorded in FY19 to $144,2 million, a 13,8% drop in FY20. Pure oil sales are expected to grow to 50% due to the upward price revision, despite the foreign currency shortages needed to import soyabeans used to make the commodity.

The pure oil contribution in the half year ended June 30, 2019 tumbled 41% to $3,1 million as the company focused more on reducing its foreign liabilities due to the shortage of foreign currency in the country.

The company also intends to support the local farming schemes of various cereal crops to facilitate the availability of the crops in the country.

“With efforts to mitigate the reliance on imported raw materials, the group intends to continuously support local agriculture with a variety of cereal crops planted during the year through two substantial contract farming schemes.”

Due to the subdued rainfall in the 2018/19 farming season in Zimbabwe, resulting in a drought, the company foresees a comparative advantage since NFHL tends to perform better under such circumstances in which they leverage their balance sheet to import at scale.

“The government of Zimbabwe has indicated that the country will need to import 800 000MT (metric tonnes) of grain to meet the national grain requirement of 1,8 million MT (which includes both national demand of human and livestock consumption). We see some comparative advantage as National Foods tends to perform better under such circumstances which they can leverage their balance sheet to import at scale,” said

The company expects capacity revival on maize availability after the government lifted the ban of importation of maize as opposed to relying on the Grain Marketing Board (GMB) alone.

NFHL says it is wary of the ability of the government to sustain the same level of subsidies through GMB in comparison to the prior years leading the country to rely on significant imports hence, compelling the government to allow the private sector to directly import most grains.