NATIONAL Foods posted an increase in profits by 112% following measures initiated by government to protect the domestic milling industry.
BY KUDZAI CHIMHANGWA
In unaudited results for the last six months of December 31 2012, company chairman Todd Moyo said the industry benefitted from subsidised imports, enabling local manufacturers to reinvest more confidently in their plant and equipment.
National Foods recorded profit approximately US$0,74 million, realised through the disposal of excess property, plant and equipment.
This also contributed to the significant growth in profit before tax of 109% over the comparative period.
The company’s total assets turnover stood at 1,22 during the period under review.
This ratio is used to indicate the effectiveness with which any company’s management uses its assets to generate sales and a relatively high ratio tends to reflect intensive use of assets.
Moyo said, in tandem with the significant increase in raw materials requirements, the group secured increased borrowings to fund stock. Borrowings commensurately increased to US$21,5 million, resulting in a gearing ratio of 30%.
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The gearing ratio is a measure of a firm’s financial leverage or risk and a ratio is indicative of a great deal of leverage, where a company is using debt to pay for its continuing operations.
Interest cover, which is a ratio used to determine how easily a company can pay interest on an outstanding debt, stood at 18,9.
The company noted that local production levels for maize, wheat and soya beans did not grow as expected and the firm continued to import the bulk of these commodities.
The current ratio, which measures a company’s ability to pay short-term obligations, stood at 1,6 as compared to a previous figure of 1,72.
Net profit margin stood at 0,53, which is a measure of profit relative to sales, during the period under review as compared to 0,31 of the previous period.
A company’s net profit margin is a measure of profit relative to sales.
“Positive changes in general economic activity continue as shown by greater levels of household disposable income which has benefitted our business,” said Moyo.
“Capital investment initiatives to improve the efficiency of our operating platform continue,” he said, adding that the company expects to spend US$8,5 million in capital expenditure during the financial year.
The company, which produces Red Seal, Gloria and Mahatma products, installed a generator to provide backup power to the Bulawayo flour mill and expects a similar project to be completed by year end for the Harare flour mill.
