BUSINESS REPORTER
Innscor Africa Holdings Limited, an expansive, cash-rich manufacturing and retail conglomerate listed on the Victoria Falls Stock Exchange, is planning to spend more than US$60m this year on capital expenditure (Capex) across strategic business units to strengthen its market dominance, it has been learnt.
Details of the planned Capex were revealed by board chairman Addington Chinake in the company’s latest financial statements.
“A capex of between US$ 50m and US$60m investment is scheduled to be invested during 2024. During this period, National Foods will invest in biscuit plant, pasta plant, snacks expansion, rice downpacking and storage.In the bakeries division, the group will invest in Harare automation initiatives and expansion as well as recapitalisation of Baker’s Inn delivery fleet.
“Profeeds will also invest in new Bulawayo stockfeed factory and new Harare Distribution Centre while Colcom will invest in the ongoing upstream piggery operations, Coventry Road factory modernisation and upgrades of Colcom shop retail expansions,” Chinake said.
According to him, Prodairy will invest in additional plant capacity investments, introduction of new categories, new product formats and route-to-market investment. NatPak on the other hand will make investments into capacity increases in flexibles division, capacity increases and new category investments in rigids division and ongoing investment in sacks division.
The investments were made possible by Innscor’s exceptional operating cash flows of US$112.070 million for the fiscal year 2023. This allowed the business to make investments in a number of divisions.
“The strong operating cash flows enabled the group’s extensive investment programme to progress at pace,” Chinake said.
He claimed that for a substantial portion of 2023, the operating climate proved complicated and difficult, and the group’s trade performance in terms of profitability and return on equity essentially reflected this.
Despite the trading results, the group maintained its remarkable free cash flow generation, which fueled the multiple ongoing capital development projects throughout the whole company portfolio and allowed for high levels of cash returns to shareholders.
“From a trading perspective, our business models continue to undergo constant refinement to ensure we remain agile and relevant in a dynamic and complex operating environment. It is vital that our expansion programmes yield world-class quality products, and that our increasing manufacturing capacities across our business units translate into economies of scale, resulting in excellent pricing for our customers; we will continue to strive to make the lives of our customers better.
“Over the past two financial years, the group has deployed almost US$125m in expansion capital investment across its numerous business units. This investment programme has allowed for the establishment of new business units and products, enabled the expansion and modernising of existing manufacturing lines, extended existing product categories, and will ultimately enhance the overall manufacturing efficiencies and capabilities of the Group as critical mass is reached. Much of this investment has recently been commissioned, or is in the final stages of commissioning, and in the period ahead we will deploy considerable focus and energy on ensuring these exciting new investments operate according to the necessary operating models, driving positive returns to shareholders,” Chinake said.
Improved capacity utilisation across the group’s core manufacturing businesses, along with the introduction of new product categories, category extensions, and route-to-market optimization strategies implemented during the financial year under review, contributed to the group’s revenue of US$804.04m in 2023, a growth of 14.7% over the comparative year.
According to Chinake, the group’s operating profit before depreciation, amortisation, and fair value adjustments, or “EBITDA”) level saw a slight contraction in margin efficiency terms of 3.7%. This was primarily due to a reduced gross margin yield, as our units attempted to minimize the impact of price increases on consumers and maintain volume momentum. As a result, the full increase in the core bills of materials could not be fully recovered in the sales price.
At US$91.061m at year’s end, EBITDA was 13.5% less than in the prior year.
