• Fri. Apr 19th, 2024

NatFoods keeps keen eye on capex commitments, interest-bearing borrowings

ByETimes

Mar 26, 2024 #NatFoods

By ETimes

HARARE – By adjusting its functional currency, managing legacy liabilities, and restating financial reports, NatFoods has demonstrated adaptability to the changing currency environment in Zimbabwe to maintain transparency and compliance in its financial reporting practices.

Accordingly, the company reported a noticeable performance improvement in the first half of the current financial year compared to the same period last year.

With a keen eye on capital expenditure commitments and interest-bearing borrowings, NatFoods charted a course towards sustainable growth and prudent financial management. The company’s focus on improving recent investments and introducing innovative products signalled a future brimming with opportunities and growth potential.

Driven by a vision of sustainable growth, NatFoods not only focused on financial performance but also extended its reach to the community through a robust Corporate Social Responsibility (CSR) program. Supporting 48 registered institutions across Zimbabwe’s provinces, the company’s CSR initiatives touched the lives of orphanages, vulnerable women and children, schools, hospitals, and conservation programs.

Here is a financial analysis of NatFoods performance:

Revenue Growth

The company reported a revenue increase of 3.3% to US$172 million for the six months ended 31 December 2023. The moderate revenue growth was largely volume-related, driven by gains in the stockfeeds and flour divisions, partially offset by losses in rice volumes due to export bans.

While cereals and snacks units showed volume growth, biscuits volumes declined significantly. The increase in pasta volumes and the commissioning of new manufacturing plants indicate growth opportunities in these segments.

Total volumes for the current period amounted to 285,000 tonnes, representing a 34% increase over the comparative period.

Profitability

Gross profit decreased by 21%, primarily due to cost pressures, while operating costs increased by 79%. Despite the decline in gross profit, the company managed to reduce interest costs significantly, leading to a 56% increase in profit before tax compared to the previous period.

Capital Expenditure (Capex)

NatFoods reported a capital expenditure of US$8.42 million for the six months ended 31 December 2023. The capital expenditure reflects investments in property, plant, and equipment to support growth initiatives, improve manufacturing capabilities, and drive operational excellence.

Segment Assets and Liabilities

The segment assets for the milling and intersegment manufacturing properties adjustments totaled US$146.26 million as of 31 December 2023. The segment liabilities for the same period amounted to USD 9.8 million, indicating a strong asset base relative to liabilities.

The company’s focus on capital expenditure, segment asset optimisation, and new plant commissioning underscores its commitment to driving growth, efficiency, and innovation in the food processing industry. By leveraging its property and equipment effectively, NatFoods aims to enhance productivity, expand market presence, and deliver value to stakeholders in a competitive business environment.

While the company’s assessment as a going concern is positive, the impact of cheap imported goods on its operations and shareholder value should not be underestimated. Proactive measures and strategic planning will be crucial for the company to navigate the competitive landscape and sustain long-term value for its shareholders.

By ETimes

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