Tiger Brands associate unit in Zimbabwe, National Foods yesterday said it expected to push more rice volumes as it lobbies for the government to remove the Value-Added Tax (VAT) on rice.
This comes as the lifting of an export ban by India on the commodity is expected to translate to a reduction in the company’s pricing. India had, however, recently lifted the export ban on rice.
National Foods manufactures foodstuffs, stock-feeds and snacks among others for the Zimbabwe market. It said that during the quarter to the end of September, volumes for rice were impacted by the imposition of VAT on rice as well as the high global raw material prices due to India’s export ban.
“These two factors have made rice relatively expensive compared to other starches,” said Leigh Howes, company secretary for National Foods.
National Foods expects that the lifting of the ban “will result in a reduction in raw material prices, and in turn a reduction in price” to the consumer.
In the meantime, the company continues to lobby the Zimbabwe government to remove VAT on rice, adding that the foodstuff is now considered a basic food product by most consumers.
During the period to end September, the rapid increase in operating costs in real terms, notably power and human capital costs hobbled National Foods. Additionally, power supply became increasingly unreliable,necessitating greater reliance on “expensive back-up power” alternatives.
Although the company described the period under review as as challenging, it said “consumer demand remained generally robust” for the product categories which the group produces.
In line with this, volumes for the September quarter firmed up, increasing by 20% over the comparative quarter. The rise in volumes was reflected across all categories, with the exception of rice and salt. Significant growth was registered in maize, stockfeeds and the company’s newly introduced products such as cereals and pasta.
National Foods subsequently raised revenues for the period by 23% to $101 million. The company had to lowly price its products to maintain affordability for consumers.
“The volume momentum was in part driven by our strategy to keep prices as low as possible in a very competitive market. However, this, together with the operating cost pressures meant that profitability growth was muted relative to volume growth,” said Howes.
The company’s management is now focusing on driving robust procurement, as well as strengthening operating and cost efficiencies, in order to improve margins while maintaining firm top line momentum.
“A second area of focus will be the Group’s newer categories, (cereals), pasta and biscuits, where we will seek to build further on the positive momentum seen so far in these categories,” said the company.
“Demand for maize meal is expected to be firm in the period ahead, as household reserves are low following the devastating drought last year.”