Brace for war-induced price shocks: Natfoods

BY TATIRA ZWINOIRA ZIMBABWE Stock Exchange listed milling giant, National Foods Holdings Limited (Natfoods) yesterday warned of war-induced price shocks that will spark an inflationary surge.

Zimbabweans have already been thrown off balance by relentless price hikes in the past year underpinned by a weakening local currency.

On Tuesday, the Zimbabwe National Statistics Agency said annual inflation spiralled to 96,4% this month, from 72% in March, in one of the latest signs that economic troubles were mounting, and consumers would be at the receiving end of a more brutal crisis.

The month-on-month inflation rate also rose to 15,5%, gaining 9,2 percentage points from a March comparative of 6,3%.

Natfoods said in a filing with the ZSE that the crisis would be compounded by the Russia/Ukraine war, which has already resulted in commodity price surges including wheat, maize and fertilizer.

“The war in Ukraine has caused a surge in global commodity prices, with the jump in wheat and fertilizer prices being of particular relevance to National Foods,” the group said, sharing third quarter results with investors.

Natfoods’ third quarter ended on March 31, 2022.

“These increases will see inflationary pressure in US$ terms in many of the categories we participate in during the coming periods, and especially the flour to bread value chain. The group is carefully managing its pricing strategy, doing its utmost to minimise the impact on consumers by moderating prices in order to retain volume,” the group added.

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It said significant efforts were being made by government and the private sector to promote the winter wheat crop, a critical initiative in view of global wheat price hikes.

“Notwithstanding the recent headwinds driven by local inflation and the situation in Ukraine, National Foods remains optimistic on the trajectory of the local economy,” Natfoods said.

During the period under review, volume momentum for the third quarter slowed, with an increase of only 3% relative to prior year.

Natfoods said this was compared to a year-on-year volume growth of 24% achieved in its first quarter and 8% achieved in its second quarter.

“Volumes for the quarter were largely impacted by an expected decline in maize offtake following the excellent 2021-22 harvest. 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,” Natfoods said.

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In a breakdown of its results during the period under review, Natfoods recorded volume increases of 3% in flour, stockfeeds (16%), snacks (10%), and cereals (52%). However, Natfoods recorded volume decreases in maize of 11% and another 11% in other segments.

“Maize volumes have decreased following the decent harvest last year and increased household retentions. With our expectation of an ongoing recovery in local agricultural production we have extensively remodelled this unit to enable it to compete sustainably,” Natfoods said.

“Performance in the cereals unit (which includes extruded products) was strong, as a result of broadening of the product portfolio to support the Pearlenta NutriActive maize porridge. The other category largely comprises biscuits and pasta. Our biscuits unit continues to operate at capacity, while pasta imports were impacted by logistical issues.”

Natfoods said given the ongoing uncertainty around the ultimate impact of COVID-19, it was not possible to assess, with absolute certainty, the full impact it would have on the group’s financial performance for the year ending June 30, 2022.

However, the group reported that the financial status of the group remained healthy.

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