NATIONAL Foods has said anticipated reduced yields for the 2019/20 agricultural season will result in the company continuing to import significant quantities of raw materials.
The group’s main raw materials are maize, wheat, and soyabeans.
Todd Moyo, the group’s chairperson, in a statement of financials for the half year period ended December 31, 2019, said the company has played a significant role in supplying maize meal on the government subsidy programme, with over 45 000 tonnes milled since December 2019, when the project was launched.
“The outlook for the coming agricultural season is not encouraging, with plantings having significantly reduced and yields likely to be impacted by poor weather,” he said.
He added that the company will continue to play a key role in complimenting government’s efforts in respect of food security in the period ahead.
During the period under review, volumes declined by 32 percent to 211 381 tonnes compared to the same period last year.
“There were declines across all categories with the exception of maize meal, largely driven by reduced consumer spending power and the progressive removal of subsidies, notably in the flour category,” said Moyo.
Volumes for the flour division during the period decreased by 49 percent on prior year, as the significant subsidies which existed last year were progressively removed.
Moyo said in spite of the reduced volumes, this was a positive move which has led to the consistent availability of bread and a generally more sustainable trading model for the wheat-to-bread value chain in the longer term.
Maize meal volumes closed the period flat on last year’s high base, as demand remained strong following a relatively poor harvest.
“The group expects very high demand in the coming period and has embarked on a significant maize importation programme,” said Moyo.
He added that the Mutare and Masvingo maize mills have both been reopened, with the resuscitation of the Masvingo mill being especially noteworthy as it was last run in 1998.
Moyo said stockfeed volumes declined 21 percent compared to same period last year, a decline that was in line with the overall market performance.
He said the effective removal of subsidies on the maize component of feed rations caused a substantial increase in the price of stockfeed relative to inflation.
“Together with the declining consumer disposable income this saw reduced demand for protein products, in turn impacting the stockfeed market,” he said.
The groceries volumes were severely impacted by the relative affordability of rice compared to other starches, declining by 39 percent compared to the prior period.
Moyo said the declines were largely in line with the market as a whole and the recovery of volume momentum in this division will be a key priority in the coming period.
“Snacks and Treats volumes in this division reduced 42 percent compared to previous period, as consumers tended to focus on procuring the essential basics,” he said.
In addition, he said, the removal of subsidies impacted the relative affordability of both snacks and biscuits. Moyo said in the snacks category, the group’s new innovation “Allegros Popticorn” has been very well received by the market.
During the period under review, the group launched a maize based instant breakfast porridge under the “Pearlenta Nutri-Active” brand after commissioning the new plant.
Moyo said although the product has only recently been released, the initial market feedback has been extremely positive.
Pure Oil, where National Foods holds an effective 40 percent saw volumes declining by 13 percent compared to last year. Cooking oil volumes declined by 25 percent, a similar trend to other basic food categories.
“There were steady volume improvements in the laundry soap, baker’s fat and margarine categories,” he said.
Moyo said the group continues to support local farming, although the schemes were heavily curtailed compared to last year due to the shortage of bank funding on the back of constrained market liquidity.
During the 2019 winter wheat season the group supported 2 495 hectares of local wheat which produced 10 374 tonnes.
Plantings for the 2019/2020 summer season consisted of 2 200 hectares of maize and 1 250 hectares of soy beans.
Moyo said the group has the capability to significantly increase the size of these programmes with improved access to financing facilities.