Top milling firm on its knees

. . . Ris­ing costs, weak de­mand hit Le­sotho Flour Mills

Lesotho Times - - News - Retha­bile Pitso

LE­SOTHO Flour Mills (LFM) Man­ag­ing Direc­tor, Ron Mills, says the firm is reel­ing from ris­ing pro­duc­tion costs, weak lo­cal de­mand and flour im­ports from South Africa which have re­sulted in bread-price in­creases, which cus­tomers can ill-af­ford.

LFM was es­tab­lished in 1979 and is owned by gov­ern­ment and Seaboard Milling Com­pany — a global agribusi­ness spe­cial­is­ing in the pro­duc­tion of grain and pro­tein-based foods in Africa and South Amer­ica.

The firm’s prod­ucts in­clude flour, maize meal, samp and sugar, and at its peak, LFM ex­ported over 13 000 tonnes of flour to South Africa un­til the cur­rent slump, which has seen ex­ports plum­met­ing to 9000 tonnes for the past four months.

In an in­ter­view with the Le­sotho Times this week, Mr Mills said a com­bi­na­tion of fac­tors had mil­i­tated against the com­pany, and threat­en­ing its viability.

Mr Mills added LFM’S woes be­gan three years ago fol­low­ing an in­crease in the price of wheat, which made hik­ing the prices of its prod­ucts in­evitable.

This, he said, was com­pounded by the ris­ing cost of fuel and raw ma­te­ri­als, as well as the im­por­ta­tion of com­pet­ing prod­ucts, which are nor­mally be­ing sold at a much cheaper price.

“South African millers are dump­ing flour into Le­sotho, most of which is a copy­cat of our top brand Easy Bake used to make steam bread,” said Mr Mills.

“For the past two years, the flour mar­ket has been shrink­ing due to the very high cost of wheat.

“Cur­rently, the price of wheat is around R3 900 per tonne whereas in 2012 the price was R2 800.

“In ad­di­tion to that, we have also seen steep in­creases in the cost of elec­tric­ity and pack­ag­ing, as well as fuel, which have re­sulted in flour be­com­ing an ex­pen­sive propo­si­tion for the ma­jor­ity of con­sumers.”

He added con­sumers’ dis­pos­able in­come had failed to keep pace with the ris­ing cost of the com­modi­ties re­sult­ing in lower sales.

“The main rea­son for the high prices, like I said, is the wheat price which has been hurt by the weak (South African) rand ex­change rate par­tic­u­larly against the Amer­i­can dollar,” Mr Mills said.

“South Africa has to im­port from over­seas, al­most 50 per­cent of the wheat the coun­try con­sumes each year as their farm­ers are only pro­duc­ing half of what they need.”

He also re­vealed flour ex­ports to South Africa had also de­creased due to price wars be­ing waged by com­pet­ing milling com­pa­nies across the bor­der.

Lo­cally, Mr Mills said, the clo­sure of some of LFM’S largest cus­tomers, such as As­to­ria Bak­ery and Golf Bis­cuit, had dealt a heavy blow to the com­pany’s rev­enue base.

“An­other is­sue im­pact­ing on our flour sales in the last cou­ple of years has been the clo­sure of some of our larger cus­tomers,” he said.

“Both As­to­ria Bak­ery and Golf Bis­cuit bak­ery closed in the past two years and there have not been any new cus­tomers to come in and re­place them.”

De­spite the chal­lenges, Mr Mills said LFM was mak­ing ef­forts to re­vive the com­pany’s for­tunes.

Mr Mills added man­age­ment had lob­bied the Min­istry of Trade and In­dus­try, Co­op­er­a­tives and Mar­ket­ing to en­act tar­iff pro­tec­tion poli­cies for their prod­ucts as well as en­hanc­ing the com­pany’s mar­ket­ing strate­gies.

“Ac­cord­ing to our com­peti­tors and main cus­tomers, the flour mar­ket has shrunk about 20 per­cent due to the high prices. To fight the South Africans, we are hav­ing to dis­count more on our prod­ucts than we have nor­mally done in re­cent years,” said Mr Mills.

“We have also been dis­cussing the im­po­si­tion of tar­iff pro­tec­tion on an­i­mal feeds with the Min­istry of Trade and have made good progress in get­ting some help from them.

“The min­istry has been re­cep­tive in our dis­cus­sions and we hope to push fur­ther with the new gov­ern­ment.

“We are also work­ing on be­com­ing HACCP (Haz­ard Anal­y­sis and Crit­i­cal Con­trol Point) cer­ti­fied, a food safety pro­gramme that en­sures that all our prod­ucts are safe for con­sump­tion.

“It is a very com­pre­hen­sive pro­gramme which we ex­pect to com­plete in Oc­to­ber this year.”

Mr Mills also al­layed fears of job-losses at the com­pany, in­sist­ing man­age­ment would en­sure the work­force was re­tained through-

LFM Man­ag­ing Direc­tor Ron Mills

Newspapers in English

Newspapers from Lesotho

© PressReader. All rights reserved.