Victoria Falls Stock Exchange listed National Foods Holdings Limited has reported a 23% increase in revenue to US$101 million for the quarter ended September 30, 2024, despite facing significant challenges from Value Added Tax (VAT) changes.
The company’s products, previously zero-rated, have been reclassified as exempt, resulting in increased production costs. The VAT incurred can no longer be deducted from the net VAT payable, compressing margins.
“Cost pressure brought about by the change in the Value Added Tax (VAT) status of many of the products which the Group manufacturers , many of these products have had their status changed from ‘Zero-rated’ to ‘Exempt’.
“This means the VAT Incurred in producing these products no longer ranks for deduction in the calculation of net VAT payable in essence, the VAT incurred has now become part of the cost of production, compressing margins,” said LC Hawes, Group Legal Counsel and Company Secretary.
National Foods has lobbied authorities to remove VAT on rice, now considered a basic food product. The recent lifting of India’s rice export ban is expected to reduce raw material prices, benefiting consumers.
“Rice has become relatively expensive due to VAT and global price increases,” Hawes noted.
“We welcome the Indian government’s decision to lift the export ban and expect prices to decrease.”
The company’s strategy to maintain competitive pricing has driven volume growth, with maize, stockfeeds, cereals, and pasta showing significant increases.
“Revenue for the quarter minored the positive volume trend. Group revenue for the quarter at USD 101 million was 23% ahead of last year
“The volume momentum was in part driven by our strategy to keep prices as low as possible very competitive market. However, this, together with the operating cost pressures meant that profitability growth was muted relative to volume growth,” the company stated.
Discover more from Nehanda Radio
Subscribe to get the latest posts sent to your email.
