Mar 2008 Financial News

Supply is not an issue - NFM

Mar 28, 2008

There is no shortage of flour and customers should not panic buy.

That’s the clear message from National Flour Mills (NFM) at a press conference held yesterday at its Wrightson Road, Port-of-Spain, offices.

Alan Julien, director, marketing and sales, said: “It is not a supply problem. There is no shortage of flour. Supply is not an issue. There is absolutely no shortage of capacity by our mill.”

Julien said Trinidad had one mill prior to the Nutrimix Flour Mill, which was down for up to five months for maintenance, and it was in the process of leasing eight additional trucks to meet demand.

He said NFM has an additional 20 per cent of the market to supply with flour.

“We are asking our customers to just be patient with us. Our distribution network will be up to mark and at 100 per cent,” Julien said.

Chief executive officer Anthony Joseph said NFM has no influence on the world market prices of wheat. He said NFM was a price-taker.

He said China has become a significant importer of wheat and countries such as Russia and Kajakhstan were no longer exporting, so the countries which imported from them have to look elsewhere for their supply.

This has put an additional strain on the North American supply of wheat, he said.

“They are going to demand wheat now from the United States and Canada,” said Joseph, who added that NFM buys on the American futures market.

“We say all this simply to make the point that the shortage with respect to wheat internationally is driving up the price,” Joseph said.

Stating that up to 72 per cent of the input cost in flour was wheat, Joseph said its flour price increases will move between eight per cent on the low end and up to 39 per cent on the high end.

“The simple reason behind that is there are different grades of wheat and different types of products that take different blends, which have different costs attached to them.

“Consumer-size products are probably going to move between 18 and 20 per cent.”

NFM’s price increases are due to take effect on April 1.

He said if someone else other than NFM were to import flour into T&T now, it would cost about 56 per cent more.

Joseph said Canadian wheat is between 13 and 17 per cent more expensive and NFM is aware that the “competitive mill buys Canadian.”

He said NFM will be increasing its production of flour by up to 35 per cent to meet demand.

NFM’s food import initiative

Joseph said NFM’s sale of imported lamb, beef, ham and chicken has been “moving along.”

“We are not a major player in that market, basically a niche player, having gotten into it within the last year. Sales have been continuing,” he said.

NFM was also importing a brand of bottled water known as Blue Life, which marketing and sales director Alan Julien said has been going quite well. Asked if NFM was operating competitively in a free market system, Joseph said, “Yes.”

Regarding subsidies, he said that’s not something the company enjoys.

“Market forces determine the decisions we make,” Joseph said.

Asked if NFM’s profit margins were decreasing as a result of high wheat prices, Joseph said, “Yes.”

He said NFM has to perform a balancing act between shareholders wanting a dividend and customers having to bear the brunt of price increases.


Source:
SANDRA CHOUTHI
The Trinidad Guardian
Friday March 28, 2008

http://www.guardian.co.tt/news2.html