Zimbabwe’s largest food manufacturer, National Foods Limited (NFL), announced a positive financial outlook with an increased interim dividend despite facing challenges from ongoing tax disputes and legacy foreign currency obligations.
The company declared a US$0.0342 per share dividend, reflecting a growth of 18% compared to the US$0.029 per share distributed in the same period last year.
This positive performance comes amidst the Group’s pursuit of legal resolutions for uncertain tax positions arising from significant currency fluctuations in Zimbabwe.
National Foods highlighted efforts to achieve clarity on tax treatment related to the reintroduction of the Zimbabwean dollar (ZWL) and the subsequent shift to allowing foreign currency transactions.
The company believes interpretations of tax law by authorities differ from their own, leading to a dispute that is now before the courts.
While navigating this tax hurdle, NFL also addressed US$1.2 million in legacy foreign liabilities. These obligations stemmed from a 2019 directive requiring conversion to ZWL at a fixed exchange rate.
The company settled the amount in ZWL and received Treasury Bills (TBs) from the Reserve Bank of Zimbabwe (RBZ) in September 2022. The TBs have zero interest and vary in maturity dates.
The company expressed confidence in the Zimbabwean government honoring the TBs, considering their sovereign nature.
The fair value of these bills was established through an external valuation due to the limited transparency and liquidity associated with the secondary market where such instruments are traded.
“The Group is confident that the Government will honour the treasury bills due to the sovereign nature of the instrument and will continue to provide the necessary support,” the group said.
National Foods’ decision to present their financial statements in US dollars reflects their assessment of it being the primary currency influencing their operations. This aligns with the shift in functional currency adopted by the Group in July 2022.
Looking ahead, National Foods aims to balance a dividend increase for shareholders with the uncertainties of ongoing legal matters and managing legacy debt.