Natfoods invests $7,7m in contract farming

Tinashe Makichi and Livingstone Marufu
Listed firm, National Foods has invested $7, 7 million through Paperhole Investments Commodities towards contract farming for the 2017-2018 summer cropping season. The NatFoods scheme comes at a time when farmers are increasingly turning to contract farming and joint ventures for inputs and equipment at lower interest rates compared to banks.

For years, farmers have been stalked by financing problems, but the enactment of Joint Venture Act in May last year has seen companies like National Foods partnering growers to improve productivity. Chief executive Mr Mike Lashbrook told The Herald Business that the company’s contract scheme will be administered by PHI and Pure Oils Industries.

The investment was mainly used to fund production of 7 700 hectares of maize, wheat and soya beans. It is forecast that the company will take in more than 40 000 tonnes of maize, wheat and soya beans from local contracted farmers.

“For the 2017-2018 summer cropping National Foods will support the growing of 7700 hectares, of which 3 500 hectares will be maize and 4 200 hectares will be soya beans.

It also comes as volumes for the first quarter of the year were down due to subdued performance in stockfeeds, maize divisions and third party products. First quarter volumes were subdued at 10,1 percent (14 000 tonnes) below last year. Stock feeds were down 9 200 tonnes on account of the Avian influenza outbreak which reduced day old chicks availability.

Maize was down 7 300 tonnes following the excellent local harvest. Third party products were down 6 900 tonnes (mainly sugar and cooking oil which were traded through former Natfoods depots which have now migrated to Gain Cash and Carry. Excluding these third party products the volume reduction was 5,4 percent. Flour unit performed strongly with volumes growing 18 percent compared to last year.

“Profitability for the quarter largely met expectation as products traded last year through the Depot network did not contribute significantly to margins. In addition, costs were well controlled as the ongoing work on the cost base continues to take effect,” said Natfoods chief executive Mike Lashbook.

He said the Reserve Bank of Zimbabwe continues to provide assistance for the importation of key commodities (mainly wheat).

“We continue to work closely with the banking sector to manage our foreign currency requirements.”

Mr Lashbrook said the firm will continue to invest in extending a pipeline of key raw materials. To this end, working capital increased by $9,3 million during the quarter to $88,3 million. He said the group has a pipeline of raw materials in most of its key categories at this point.

Mr Lashbrook added that they have discontinued the importation of pasta due to the need to prioritise foreign currency.

“This will not have a material impact on profitability of the group,” he said.

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