National Foods Q3 Volumes Marginally Up Amid Cost Pressures From Ukraine War

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HARARE – Agro-industrial concern, National Foods Holdings Limited volumes for the three months to March, grew marginally at 3% compared to prior year at a time the group anticipates costs to spiral in most of its business segments due to supply chain disruptions from the Ukraine-Russian war.

This was a significant slowdown compared to volume growth of 24% achieved in Q1 and 8% achieved in Q2 due to Q3 coinciding with maize harvesting season which led to the group recording a decline in maize off take. Excluding Maize, volumes increased by 9% compared to last year.

On a cumulative year to date basis, volumes are 11% ahead of prior year, driven by stockfeeds, rice, salt and snacks.

In its trading update for Q3-22, the group said the ongoing war in Ukraine has caused a surge in global commodity prices, with the jump in wheat and fertilizer prices being of particular concern to the group.

According to the Grain Millers Association of Zimbabwe (GMAZ), the country has been having challenges accessing 65% of its wheat from a supplier in Ukraine due to the instability in the eastern European region. This month price of bread shot by almost 100% driven by increased wheat price.

The group anticipates inflationary pressures to persist in US$ terms in many of the categories it participates in especially in the flour to bread value chain.

In response to this, National Foods plans to achieve economies of scale by minimizing prices in order to retain volumes.

Nevertheless, the group flour volumes for Q3 recorded moderate growth of  4% while the stockfeeds segment remained solid gaining 16% compared to previous year levels.

The strong volume growth in the Downpacked unit which was 41% up year to date was driven by both rice and salt. There was a slow-down of a 13% uptick during Q3 as the previous year due to growth in the informal channel.

The group said the Harare Cereal and Bulawayo Flour mill projects continue to make steady progress and are expected to be commissioned mid-2022 and early 2023 respectively.

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