NTFD | National Foods FY23 Earnings Update; Revenue growth supported by elevated selling prices

The year under review saw a fluid environment characterized by local currency exchange rate volatility. Policy interventions saw the introduction of the 200% key policy rate which exacerbated costs of ZWL debt and tighter money supply conditions. Demand was consequently impacted by the illiquid conditions with volumes slowing 3% y/y to 553,000 MT. Raw material costs remained elevated in the period on account of supply chain blockages from the Russia-Ukraine war. As such, average realised selling prices for National Foods were US$621 per ton compared to an average of US$494 per ton historically. Volumes in the flour division were negatively affected by high wheat prices posting a 12.3% decline y/y. Bread consumption was consequently impacted as prices rose above the US$1 per loaf price resulting in consumers switching to better-priced starches such as rice. As a result, bread volumes slowed 3.7% relative to the same period last year. Maize volumes declined an aggregate of 9.4% y/y due to pricing distortions and the duty-free proclamation on basic goods. Stockfeed volumes posted a 10% increase compared to FY22 bolstered by demand in the poultry, beef and dairy sectors. Volumes in the Downpacked unit, which primarily packs rice and salt, saw encouraging growth of 14% versus last year. Rice volume growth continued to be largely driven by the informal sector, and likely benefited from consumers substituting from pricier bread. The snacks division grew 25% as both hard snacks and soft snacks saw improved sales and capacity enhancements came on stream. Biscuit volumes however slid 1.8% versus the same period last year due to pricing pressures of flour whilst cereals volumes in the market grew 47%. Foreign currency-denominated sales for the group continue to pick up in line with an increasingly dollarizing economy allowing for sufficient funding to import raw materials. Revenue grew by 21.7% in the period to US$343mn despite negative volumes growth as elevated realised prices per ton buffered the topline. EBITDA margins however slowed from 9.9% in FY22 down to 6.8% within the period as many cost lines effectively dollarized and the full extent of raw material inflation was not passed on to the consumer. PAT for the period registered at US$9.53mn, down 39% y/y. The group closed the period on a net cash position of US$3.81mn and operating on an OCF/EBITDA of 113% with US$17.91mn being used for capital expenditure activities within the period. National Foods declared a final dividend of USc1.15, bringing the total dividend for the year to USc4.05.


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