NATIONAL Foods Ltd (Natfoods) is back in the black after having made a stunning $19,2 billion loss last year.
company has even declared a final dividend of $36 per share, making the total for the year $42.
In its audited results for the period ending December 31 chairman Godfrey Gomwe said profit from operating activities at $51,8 billion contrasts “favourably” with the previous year’s loss of $19,2 billion, while turnover increased marginally in real terms to $381,4 billion on reduced volumes.
Gomwe said however 2004 had a slow start and customers reported poor Christmas sales and appeared to be currently running down excess stocks.
He said this resulted in low volume sales in January.
“However, there are positive indications that this is a short-term position and it is anticipated that sales will pick up to previous levels,” Gomwe said. “In the meantime, the greatest challenge remains cashflow and working capital management. Maintenance of adequate margins are critical for the satisfactory servicing of the company’s considerable asset base.”
Total costs at Natfoods reduced from $68,2 billion to $60,3 billion due to stringent cost control measures throughout the company.
Gomwe said savings were achieved in selling and administrative costs, but transport and distribution costs were affected negatively by fuel price increases when this commodity was effectively de-controlled.
The chairman said due to increased working capital requirements of $23,1 billion, cash and cash equivalents reduced by $3,9 billion over the year and net borrowings at the year-end amounted to $12,2 billion.
He said the company invested significantly in strategic raw material stocks and at year-end these inventory levels remained higher than expected.
“In addition many of the company’s customers failed to meet their December 2003 payment obligations timeously,” Gomwe said. “The gearing ratio of 7,4% was satisfactory given these circumstances although the high interest burden at the end of the period was of concern.”
The chairman said in the flour division the limited availability of local wheat was supplemented with imports to maintain volumes at reasonable levels and this division contributed significantly to the results.
“In the latter part of the year, maize throughput improved but mill capacity utilisation remained well below desirable levels,” Gomwe said. “Together with toll milling contracts for aid organisations this division made a marginal contribution to operating profit. Cooking oil in Zimbabwe is largely extracted from soyabeans and cottonseed, supplemented by imported crude oil.
During the year, the relaxation of controls over this product helped improve availability to the market, which contributed to this division’s favourable performance.”
He said rice sales were buoyant for most of the year due to the shortage of other starch products.