- Records 23% revenue growth to US$101M in Q1 FY2025 despite VAT changes and power challenges
- Volume growth rises 20% across most categories, driven by strategic pricing and new product introductions
- Company advocates for VAT reform and improved power supply to mitigate costs and ensure competitiveness
Harare- National Foods, the country's leading food producer, achieved a remarkable milestone, surpassing the US$100 million mark in just three months of FY2025 (Q1), despite challenges posed by power outages and Value-Added Tax (VAT) implications.
The company's first-quarter revenue reached US$101 million, representing a 23% year-over-year growth, driven by a 20% increase in group volumes.
However, profitability efficacy growth was subdued due to operating cost pressures and intense market competition, which compelled the company to maintain low price points.
Volume growth was robust across most categories, with notable gains in Maize, Stockfeeds, and new product lines such as cereals and pasta.
Conversely, rice and salt volumes declined, largely attributed to the imposition of VAT and elevated global raw material prices resulting from India's export ban.
The removal of India's export ban however, is expected to alleviate raw material costs, enabling price reductions for consumers. National Foods continues to advocate for the reinstatement of zero-rated VAT on rice, now considered a staple food product.
The manufacturing sector, including National Foods, faces significant challenges due to electricity supply shortages. In HY2023, the company incurred US$25.7 million in costs, primarily driven by a 448% increase in diesel consumption due to blackouts.
The exemption of VAT, coupled with high electricity costs and the influx of cheap imported goods, creates an uneven competitive landscape.
Formal businesses, which comply with tax regulations, are disadvantaged by their inability to reclaim VAT, leading to elevated production costs.
This unsustainable environment forces companies to sell at a loss to compete with informal traders operating outside the tax framework.
The reinstatement of zero-rated VAT would mitigate these challenges, promoting not a level playing field for tax-compliant businesses but the first step for a better and ensuring the long-term viability of the manufacturing sector.
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