Natfoods to boost capacity

Business Reporter
LISTED grain processor and miller National Foods Holdings Limited plans to invest over US$30 million in the rehabilitation of its flour mills as part of strategies to boost capacity and unlock shareholder value. Speaking on the sidelines of the company’s Annual General Meeting held in Harare yesterday, Natfoods chief executive Mr Jeremy Brooke said the group would focus on rehabilitating the mills over the next 24 months.

“Our oldest piece of equipment is 90 years old and we are spending a considerable amount every year since dollarisation on our equipment. Our current equipment replacement programme is on track and we are investing US$30 million on the flour mills,” he said.

He said the project would be funded from internal resources. In 2010, Natfoods closed its flour milling plant in Bulawayo citing operational, logistical and capital constraints leaving many bakeries who relied on the mill for flour in the city stranded. The plant was reopened the following year enabling the company to boost flour production and create more job opportunities for people in Bulawayo.

The Bulawayo mill complements the one in Harare and both have been earmarked for repairs. Mr Brooke said imports which were coming in at cheaper prices were also affecting the company’s output. He urged Government to impose stricter protection measures on imports to help local companies realise profit.

“The impact of imports is that we do not run our factories as well as we should. If government allows imports, our factories operate at 30-40 percent but if it does not, we work at 100 percent,” he said.

He said currently, the factories were operating at 44 percent.
Mr Brooke added that the increased imports and the long wheat pipeline had negatively affected profitability which was below budget for the year to June 30.

“I am selling wheat today that I bought five months ago. Because it comes from Ukraine and has to travel all the way to Zimbabwe, I have to wait for five months for it to be delivered, then sell it in six and get paid for it in seven,” he said.

Mr Brook said the company had a good raw material stock amounting to US$90 million which would help the company increase profitability going forward.

Meanwhile, shareholders approved the group’s plan to buy back at least 10 percent of its issued ordinary shares. Natfoods has been buying back shares from the public for the past three years.

However, the Securities Commission of Zimbabwe last month condemned companies’ share buybacks arguing the schemes were exacerbating the liquidity crisis and “keeping the Zimbabwe Stock Exchange (ZSE) obscure”. The board argued that Natfoods had been performing well and paying dividends for the past four years so the share buyback would go ahead.