Uncertain environment spooks Innscor

LIVINGSTONE MARUFU

Innscor Africa Limited has said the operating environment is uncertain after ‘persistently’ high cost of debt and the Covid-19 pandemic-induced supply chain disruptions , continue to drag on the business over the last 12 months.

The company’s chairman Addington Chinake said there was also a problem of imported inflation caused by the current global commodity price cycle.

“The operating environment remains complex and uncertain, with conflicting and unclear laws and regulations. These areas will need to continue to receive focus by our management teams,” Chinake said.

He said ever since world economies opened up there has been a huge demand for goods hence the price of raw materials went up.

In addition to the persistently high cost of debt, pricing corrections to the fuel, power, maintenance and human capital cost lines impacted the overhead base, Chinake said.

“This was further impacted by the current global commodity price cycle and pandemic-induced supply chain disruptions, placing cost-push pressure onto a number of components within the bills of material,” he said.

In its financial results  for the 12 months to June 30,2021, the top line for Innscor jumped 35% to ZWL$66.9bn  from ZWL$49.4bn  reported in the prior comparative period owing to strong volume performance across most units.

Volumes in the bakery division increased 36% while that of National Foods  closed 15% ahead of the prior comparative period, with strong growth realised within the flour, stockfeeds, groceries and snacks divisions.

The flour milling division recorded volume growth of 43% over the comparative year, supported by strong consumer demand, especially within the pre-pack category.

Chinake said a project to upgrade the Bulawayo site with a new state of the art flour mill is underway, and this line is expected to be commissioned during the latter part of the 2022 calendar year, enabling significant capacity and product quality improvements.

The stockfeeds division delivered a 33% increase in volumes versus the comparative year, with the stronger local demand for protein products and increased demand from small-scale poultry production, being the key determinants of the overall performance.

Volumes within the grocery division increased 74% compared to the comparative year; this substantial growth was achieved largely in the rice and salt categories enhanced by competitive pricing.

Chinake said the critical focus remained on balancing volume objectives with appropriate return levels, careful overhead cost containment, and optimal cash flow generation while preserving balance sheet value.

Profit for the period  went down 41% to ZWL$4.39bn in the period under review from ZWL$7.42bn reported in the prior comparative period, due to increased  operating expenditure following escalations in certain of the cost buckets, Chinake said.

However, the group balance sheet remained solid, whilst net gearing was negative at the end of the period under review.

The report also showed that the group had strong operational cash flows.

Innscor approved an investment pipeline of US$70m covering ongoing business optimisation and expansion within existing business units that are now in various stages of implementation and will continue to be phased in over the coming financial year.

The board also declared a total dividend of ZWL$82m for the year ended June 30 2021.