National Foods feels competition pinch: Maize milling division volumes drop

NATIONAL Foods says its maize milling division has recorded a 28 percent decline in volumes due to increased competition on the local market.

In its financial statement for the half year ended December 31, 2016, the agro-processing firm said the increased scale of Government supported supplies of subsidised maize substantially dampened demand for maize meal.

“The maize division had a very challenging period with volumes 28 percent below last year . . . In addition, millers competed aggressively on price for the diminished market, which caused a material reduction in margins.

“Consequently, the business registered a $1,5 million loss before tax in the six-month period ended December 31, 2016,” it said.

The group said regional availability of maize remained tight and is expected to continue until the next harvest season, which is expected to start next month.

It said the next harvest looks promising locally as well as across the region following the excellent rains received.

During the period under review, National Foods said its revenue declined by 3,5 percent compared to the previous period while difficulties in the maize business and general pricing restraint led to gross margin reducing by 9,3 percent.

The group’s financial position remained healthy with net borrowings of $1,8 million as at December 31, 2016.

“Net working capital closed the year at $48,83 million versus $46,25 million for the prior year. As is normally the case at this time of the year, the group elected to carry stocks of certain key raw materials at the close of the period.

“The business remained well positioned to fund its growth ambitions as well as continued dividend flow to its shareholders,” it said.

National Foods’ other divisions such as flour milling, the moving consumer goods (MCG), and oil division recorded significant performance during the period under review.
“The flour division produced a solid result for the period with volumes increasing by 16 percent as compared to last year.
“The growth emanated from the baker’s flour category and in particular strong demand from all of the major plant bakers who are now sourcing all of their flour requirements locally.
“The MCG division produced a significantly improved result, driven by rice volumes, which increased by 54 percent and Red Seal salt, which maintained its market leading position,” it said.
National Foods holds a 40 percent stake in Pure Oil Industries and its results are equity accounted.
“The business produced an excellent set of results for the period with revenue increasing by 138 percent over the prior period,” it said adding that the stock feeds division produced a reasonable performance for the period.
The stock feeds division’s volumes declined by three percent compared to the prior period, with most recent data from the Stockfeed Manufacturers Association showing nationally that feed volumes manufactured declined by 11 percent for the second half of 2016 compared to the same period in 2015. Capital expenditure for the period amounted to $2,1 million.
The group continues to support local farming with 5 800 hectares of maize, wheat and soya beans having been planted through its scheme.
“In addition to this, Pure Oil Industries launched soya bean contract farming scheme for the 2016/17 season where the production of 1 300 ha of soya beans has been supported through the provision of inputs to contracted farmers,” it said. —

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