National Foods: An unpretentious behemoth


National Foods was crowned the best performing company on the local bourse in the Financial Gazette’s Top Companies Survey 2015

MIKE Lashbrook doesn’t think much about the perception that National Foods Holdings (Natfoods) is a behemoth that is doing very well compared to peers in the agro-industrial sector. Sitting in his office at Gloria House, one of too few vibrant areas in Harare’s Workington industrial region, he ponders over how best the company should please its loyal customers and grow its market share.
Natfoods is one of few Zimbabwe Stock Exchange-listed companies that have consistently performed well since the country adopted a hard currency regime in 2009 to escape an unpleasant hyperinflationary crisis that eroded the value of the defenceless domestic currency.
Although the hard currency regime was adopted to steady an economy that was essentially in ruin, with widespread commodity shortages, it turned out the reality of that new economy was the demise of many companies that failed to recapitalise.
Natfoods was one lucky firm.
“We have humble views about what we’ve achieved,” said Lashbrook who is Chief Executive Office of the company, “but I would say that the first thing we did was that immediately after dollarisation, we recovered our market share. Thereafter, we invested heavily in our plants and our people and created efficiencies. We disposed of non-core assets and strengthened our balance sheet.”
This, apparently, was possible due to support from major shareholders: Tiger Brands of South Africa, which holds a 37 percent stake, and 38 percent stockholder, Innscor Africa, a Zimbabwe Stock Exchange-listed conglomerate with interests in fast moving consumer goods, retail, distribution and fast foods.
“We’re fortunate to have two very active and constructively involved shareholders, major shareholders. We work very closely with Innscor in terms of day-to-day management of the business and obviously they have a very strong local footprint.
“In terms of Tiger Brands, their involvement is more from a technical perspective in terms of linking us to best practise in the region.”
“I think as an organisation we’ve been fortunate in the sense that we’re well capitalised. If you look at our balance sheet now, we’re cash positive. It leaves us in a better position to influence our own destiny as a management team.
We’re fortunate that we’ve a very strong team. We spent a lot of time building the capability of our team, trying to upskill on our people and that’s a key attribute of this company,” he said.
“As an organisation, we’re very much focused on doing what’s right,” said Lashbrook, who took over as group chief executive officer of Natfoods in January last year.
When he assumed his new role, he did not have to change much of Natfoods’ policies.
As the chief operating officer during former CEO, Jeremy Brooke’s tenure, he had already been entangled in the group’s critical policy decision-making processes.
“I was a senior member of the previous team so to that extent, I was able to play a part in the previous strategy. We didn’t make large policy shifts,” Lashbrook said.
But he admits there were “a few policy shifts that we did make” to give momentum to the group’s growth.
As a manufacturing concern, Natfoods had matured, Lashbrook said, and he wanted it to become “more focused on consumers and customers”.
“We up-skilled our marketing department,” Lashbrook said, matter-of-factly. “Upskilling and training of our people was a key thing.”
The focus on training and improving the skills of staff on how best they should engage consumers and customers is understandable. Lashbrook is au fait with the difficulties on the domestic market.
“I think obviously at the moment, you’re seeing a situation where the consumer is under pressure – (there’s) declining disposable income and increased competition for that declining consumer dollar in the form of new entrants into the market,” said Lashbrook.
Indeed even as a liquidity crunch in the local economy has ruined many businesses, there are new players that have slowly emerged to pose competition to those that have survived an inclement economic environment.
“We’ve got some very strong competition locally and particularly in recent years we’ve seen new entrants in certain of our categories that have performed very, very well,” he said.
Lashbrook believes part of the reason Natfoods has prospered is its brands.
“I think we’re privileged as an organisation to have iconic brands in the Zimbabwean market place. I believe we’re strongly positioned to compete in the sector.”
He said from a performance benchmarking perspective, they were looking within theregion for “what we consider the best practice benchmarks and try and measure ourselves against them and ensure that we can compete”.
Analysts have pointed out that gross margins at Natfoods, which headed north during the first years of dollarisation, have somewhat weakened in recent years.
Lashbrook pointed out that the company had a difficult period last year in terms of business performance on the back of good maize yields.
“The dynamics are that National Foods generally sells higher volumes in a drought year, when local food supplies are less available. There is more focus on imports,” he said.
This could make the current financial year look promising. But at an annual general meeting in November, he reported that the business suffered a three percent decline in revenue for the first quarter to September 30, 2015.
But volumes had gone up five percent over the same period during the prior year.
Lashbrook said the decline in revenue had been mainly due to a decline in flour prices, whose benefit they had passed on to consumers.
“We also had more maize in our mix,” he said.
But for Lashbrook and his team, they remain focused on “being as best as we can from an efficiency and cost perspective”.
“We’re looking at costs and efficiencies to make sure we’re as good as competition in the region”.
He said they were also very eager to see a turnaround in the country’s agricultural sector.
“We try as far as possible to play an active role in the resuscitation of local agriculture. We do that in two ways, product pricing and contract farming,” he said.
Natfoods offers attractive prices for local farmers, he said. These were matched to import prices.
On contract farming, he said Natfoods supported 10 000 hectares per annum locally for various produce.
“It’s important to us and I think to the whole nation that more wealth is generated agriculturally,” he said.
“As a company, in terms of our raw materials we import more or less 60 percent of our raw materials. We are strong believers in the recovery of our agriculture.”
“Our philosophy as a team is that the economy may be in a very difficult place, but our destiny is very much in our hands as a management team. We’ll obviously look to work with our board and ensure we grow value for our shareholders and stakeholders,” Lashbrook asserted.
National Foods was crowned the best performing company on the local bourse in the Financial Gazette’s Top Companies Survey 2015. The best performing companies were announced at an awards ceremony held in Harare last year in December.
The Awards were held under the theme: “Enabling Economic Growth”, a key theme as Zimbabwe grapples to extricate itself from a prolonged economic crisis underlined by a liquidity crunch, company closures and job losses.
Natfoods is one of Zimbabwe’s largest manufacturers and marketers of food products, with a footprint spanning pre-packing and sale of dry groceries, to the manufacturing of stock feeds and food products. The company operates in segments that include milling, manufacturing, distribution and the property.
Natfoods was ranked overall best performer, followed by beverages giant, Delta, in second place, and tobacco processor, BAT, which was voted overall third best counter.
Delta also won The Disclosure and Investor Relations Award.
Top Companies Survey is produced by the Financial Gazette, in partnership with investment giant, Old Mutual.
The Financial Gazette re-launched the Top Companies Survey last year after suspending the event in 2008 due to the economic crisis, which started in 2000 and worsened in 2008 before receding on dollarisation in 2009.
For the 2015 awards, the team decided to include non-listed firms in their selection of top companies, but restricted themselves to banking sector institutions, whose financial results are published and therefore publicly available, and the insurance sector.
Although insurance sector firms do not publish their financial statements, they are evaluated quarterly by the Insurance and Pensions Commission (IPEC), which governs insurance and pensions in Zimbabwe.
Winners were judged on factors that include good corporate governance practices, ethical conduct, corporate social responsibility, consistent as well as positive financial performance as well as superior total returns to investors (capital gains and dividend yields).

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