National Foods makes good after profit

Predictions that food companies tend to thrive when there is news about a drought seem to have been confirmed with the recent interim report from National Foods showing turnover improving by 15 percent compared to the same period last year.

The company’s turnover for the six month to September clocked $1.1 billion and operating profit was up 32 percent at $73.6 million.

Profit attributable to members almost doubled from $21.2 million to $42 million largely because of a decline in net interest paid which dropped from $26.7 million last year to $12.7 million for the same period this year.

The earnings per share almost doubled from 32.91 cents to 65.26 cents and the dividend doubled from 7 cents to 14 cents.

The company says while initially 2.1 million tonnes of maize were expected, the company’s own estimation was that 1.5 million had been harvested, but with producers retaining their stocks because of fears of drought, there appeared to be very little maize left to purchase. As a result prices had begun to soar in September rising to up to $2 500 a tonne by the end of November.

This resulted in a 36 percent increase in maize meal in October. The company, however, says representations had to be made to the government to release stocks from the strategic reserves in order to avoid a further price rise which would inevitably spark trouble for the government which was recently forced to rescind a decision to introduce a 5 percent levy on income tax for war veterans’ gratuities and pensions.

But despite repeated warnings of the El Nino, farmers seems to be going ahead with planting. The latest Agritex report says 92 300 hectares of maize have been planted. This however, excludes three provinces: Masvingo, Midlands and Matabeleland North which are all generally marginal producers. The early planted crop which had been affected by the dry spell was expected to recover.

While it may be too early to predict, the forward price of maize on the Zimbabwe Commodity Exchange (ZIMACE) seems to be giving a picture that there will be adequate stocks at the end of the season. The price, currently fluctuating between $2 250 and $2 500 is expected to drop to $2 250 by January, going up slightly to $2 300 in February before declining to $1 650 between March and June.

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