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NatFoods profit margins hit by inflation

NatFoods profit margins hit by inflation 

NATIONAL Foods Holdings (NatFoods) says its profit margins suffered after it failed to raise prices in line with inflation developments in Zimbabwe.
In the face of considerable inflation developments in the country over the past two years, the group says it has not re-priced some of its products due to various reasons.
“Revenue for the period increased by only three percent compared to last year, driven by a reduction in average selling prices by five percent. The key flour, maize and stock feeds units all saw declining selling prices for a variety of reasons,” Todd Moyo, NatFoods’ board chairman, said in a comment accompanying the group’s financial statements for the half year ended June 30, 2018.

“Margins were significantly impacted by the inability to increase prices as a consequence of the price of bread which remained constant for the greater part of the year,” Moyo added.
In December last year, bakers agreed on and effected a 10 percent price hike on bread. Mike Bimha, who was then the Industry minister, immediately reversed the move and the price of bread was frozen from then until last month when bakers effected a 10 percent price hike on the commodity.
“In flour, selling prices declined by 2,5 percent due to the inability to increase prices against a largely static bread price,” said Moyo.
“Stock feed prices declined by 5,3 percent, as a result of an increased proportion of lower priced beef feed, as poultry volumes declined following the avian influenza outbreak.
“In the maize category, selling prices reduced by 15 percent due to a significant reduction in raw maize prices as the country was self-sufficient in maize for the first time in many years,” he said.
The group, however, recorded a reasonable performance for the period, posting profit before tax of $21,21 million which was 23 percent above the same period last year. Operating profit for the period increased by 14 percent compared to last year, weighed down by “a very disappointing performance from the flour division”, despite the record flour volumes achieved during the period.
Overall, the group’s profit after tax was up by 25 percent to $17 million, from $13 million in the comparable period in 2017.
The group declared a final dividend of 5,64 US cents per share payable in respect of all ordinary shares of the Company. This final dividend brings the total dividend for the year to 12,53 US cents per share.
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