admininvestor was a bold stamp of approval in the firm’s operations and the economy in general.
The transaction can be interpreted in three different ways. Firstly, it represented investor confidence in a company that has done well without bothering shareholders for huge funding.
Secondly, it points to returning confidence in the local economy as foreign investors had, for days on end, been exiting the ZSE.
The flight to safer havens had caused the bourse to slide for two consecutive weeks.
The majority of foreign investors had been pulling their investments out of ZSE listed firms on concerns over Government’s indigenisation programme, which they interpreted only as grabbing of foreign owned assets.
Concerns had also reportedly centred on poor economic performance locally and globally following the Eurozone debt crisis and double-dip recession fears.
Thirdly, this represented latent intrinsic potential presented by companies involved in production of basic commodities, moreso ahead of the festive season.
This is only apparent for investors discerning mindset.
A number of manufacturing firms listed on the ZSE have been struggling to raise capital to fund operations and this reflected in poor financial results.
Natfoods performance exposes firms that continue to wail over capital distress and using it as a scapegoat for perennial losses year in year out.
Its performance is a reminder to all and sundry that profitability is achievable even under serious financial distress and fierce external competition.
While the firm definitely required significant fresh capital injection, it has already started posting pleasing results amply supported by good management and growing demand for its basic consumer goods.
It goes without saying that even investment analysts believe the company is destined for a bright future and recommend its stock a strong Buy.
“We assume that Nation Foods will achieve volumes of 400 000, 16 percent higher than in financial year 2011.
“We therefore forecast revenue of US$242 million, expect growing volumes and a leaner structure,” said analysts.
Companies such as Natfoods and those involved in retail-food or clothes, those in real estate and financial services are expected to do well this year. After seeing a significant drop in profitability in the financial year to June 2010, National Foods released financial results for the year ended June 30, 2011 showing a significant recovery. Group revenues rose 25,1 percent to US$201 million, on the back of a 17,1 percent increase in volumes.
But the slight decline in gross profit margins resulted from the company’s strategy to maintain market share at slightly lower margins.
Operating costs, responsible for the drop in profitability last year appear to have stabilised, seeing a 0,4 percent increase to US$36,5 million during the period. Earnings before interest tax depreciation and amortisation therefore rose 198.7 percent to US$8,63 million with the EBITDA margin rising 2,5 percent to 4,3 percent. Profit before tax rose 740,4 percent to US$7,3million.
This performance saw profit after tax for the full year period rising 61,9 percent to US$5,1million and net margin for the period rose from 2 percent to 2,5 percent.
The restructuring of the agro-processing firm is expected to result in at least a 5,6 percent reduction in operating costs in the next year, with Earnings Before Interest Tax Depreciation Amortisation margins rising to 4,8 percent. Natfoods is among companies that is benefiting from the reintroduction duties on a number of basic commodities including maize meal, cooking oil, as well as processed foods.
While production continues to lag behind national demand across agricultural products, it is also believed increasing local production of agricultural products bodes well for local food producers such as Natfoods.
Londile Moyo
Online Reporter