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NATIONAL Foods Holdings Limited will reinvest US$10 million from its earnings into ongoing operations to consolidate its market position, a senior official told businessdigest last week.
Since the start of the current agricultural season, there has been erratic rainfall owing to southern Africa suffering from an El Niño-induced drought leading to lower output.
This has caused National Foods, one of the largest manufacturers of fast moving consumer goods, to reinvest US$10 million of its earnings back into the business after it had previously spent US$40 million on capital expenditures over the past three years.
“Typically, we would aim for an average target of around US$10 million a year to put back in. This year, we have just commissioned new plants and a lot of our focus will be getting them going and landing those products in the market,” National Foods chief executive officer Mike Lashbrook told this newspaper in an interview, following a tour of the firm’s new biscuit and pasta plants last week.
“We do have other development projects planned for the year ahead with that capex (capital expenditure).
“That is kind of going into our existing core operations. It will be mainly into our stock feed plant and the rice packing unit with some warehousing. It will rather be into our existing operations rather than new categories.”
During the tour, it was revealed that the pasta plant would produce two metric tonnes (MT) per hour after the firm invested US$5,6 million.
The company will also produce the same quantity at its biscuit plant, which cost US$7,7 million.
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The pasta plant was commissioned in January while the biscuit line is expected to be completed by month end.
“At Aspindale (road), we have a new breakfast/cereal plant and then a new flour one in Bulawayo. So this is kind of the cornerstone of what made up this investment. Obviously, for a big entity like us, there is a lot of ongoing capex and upgrades which are smaller but those were the key parts of that capex spent,” Lashbrook said.
The breakfast/cereal plant had a capex of US$4 million owing to a state-of-the-art Swiss Extrusion Plant capable of producing a range of products in that niche.
Regarding the Bulawayo plant, National Foods replaced its old flour mill built in the 1960s with the state-of-the-art Buhler Swiss Mill, commissioned in July 2023.
Lashbrook revealed that the firm is also planning on expanding its hard snacks manufacturing, for which the firm committed US$1,5 million to raise production capacity by 81,25% to 725MT per month. Expected completion for this investment is this month-end.
In terms of the rice plant, the firm will expand by an additional 3 200 square metre rice storage and packing capacity at its existing facility with expected completion by year end.
The Information provided indicates that a total of US$5,3 million has been committed to this project thus far. These investments are a component of the initial capex budget, which amounts to US$40 million.
Lashbrook said the funds would be self-raised from existing operations as most of their earnings were in foreign currency.
“Our philosophy as a business is that we like to think our destiny is in our own hands and deal with challenges ourselves,” he said.
“So, in terms of specifically currency related issues, as with most companies, the majority of our revenue is in United States dollars at the moment.
“It is a significant amount of about 80% to 90% and so with that in mind, it does leave us in a space where we can sustainably fund our imports and we can fund our capex.”
However, Lashbrook did not rule out approaching banks and financial institutions for additional support to meet its target should inflationary pressures and worsening effects of the drought continue.