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Business Reporter
L
eading food processor, National Foods Holdings Limited, is projected to achieve a 17 percent growth in topline to US$300 million year on year on improved production capacity and product mix.
The group, now listed on the Victoria Falls Stock Exchange (VFEX) has continued with its ongoing capacity expansion initiatives providing volumes upside.
The strategic focus for management will be on optimizing trading performance and implementation of projects to transform NatFoods from a producer of basic food commodities into a more diversified FMCG player with a larger basket of products.
According to the group, near-term projects include the commissioning of a new flour mill in Bulawayo that will increase wheat milling capacity by an additional 2,000 tonnes, a breakfast cereal plant and a new biscuit line.
The board has approved a US$5,3 million upgrade of the Harare rice plant, a further investment of US$1,5 million in the hard snacks category and investment into a domestic pasta plant.
While the group recorded lowered margins at half year, they are still above historical averages and analysts — IH Securities anticipate further correction and normalisation going into financial 2023.
“We estimate that National Foods’ topline will grow 17 percent year on year to US$302,48 million at financial year 2023. Revenue in financial year 2024 in our view will then slowdown as pricing pressure from wheat inputs subsidies. “We forecast an EBITDA of US$25,71 million to FY23 representing a margin of 8,5 percent,” said IH Securities.
Overall, the group should see volume recovery stemming from the anticipated benefits of Government measures to tame inflation and bring economic stability, in addition to improved agriculture production.
Interest rates have since been reviewed downwards twice since the beginning of the year going into alleviating liquidity challenges in the market.
Additionally, civil servants have also been granted a 100 percent salary increment going into the second quarter of the year whilst the summer crop marketing season has also kicked off increasing liquidity in consumers’ hands.
“It is on this backdrop that we expect partial recovery in volume performance for National Foods within its second half,” said IH Securities.
However, the stockbrokers opine that volumes sold in maize and stockfeeds are likely to be weak in the last quarter of the financial year 2023 due to projected over-supply of the harvest on the domestic market.
In the same vein, the raw material pipeline for National foods from the domestic market is looking promising as the company has invested US$12 million into the summer crop contract scheme lessening its import bill.
The food processing giant migrated to the VFEX this year and its share price on the US dollar-denominated exchange is seen improving to US$2,31, with IH Securities giving it a BUY recommendation.
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