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Nqobile Bhebhe, [email protected]

INNSCOR Africa   Limited, which has made US$125 million expansive investments in the past two years and a further US$32 million in the six months to December 31, 2023, seeks to ensure that investments generate the requisite returns.

The investments have seen the establishment of new business units and products and enabled the expansion and modernisation of existing manufacturing lines.

Innscor’s investment  drive underpinned the overall volume trajectory, with focus being deployed on expanding plant capacities, enhancing manufacturing capabilities and product extensions, while route-to-market initiatives continued to be refined to drive volume into new markets.

The largest diversified group is a focused group of light manufacturing businesses that, together with various strategically integrated agricultural operations, produce several of Zimbabwe’s iconic brands in the consumer staple product space.

Group chairman Mr Addington Chinake, commenting on the group’s financials for the six months to December 31, 2023, said despite the macroeconomic environment, the Group delivered pleasing volume growth across most business units against the comparative period.

This was driven by a sustained recovery across the Mill-Bake value chain, supported by firm demand in the Protein, Beverage and Light Manufacturing segments, which all benefited from investment activity targeted at capacity building, product extensions and venturing into new categories.

He noted that in the period under review, the Group has been actively focused on building capacity within the sales and distribution functions of consumer-facing business units and these route-to-market initiatives have been central in delivering improved volume performance.

“The extensive capital expansion programme, which has totalled US$125 million in the past two financial years, combined with a further US$32 million during the period under review, is reaching a mature state and there will be extreme focus to ensure that the funds deployed into these investments generate the requisite returns,” said Mr Chinake.

He said returns on shareholder equity are improving and management will continue the work to target the optimisation of its trading models, to ensure this positive trend continues.

From a working capital efficiency and free cash generation standpoint, both remained excellent during the period under review and remain strategic focus areas, he further observed.

Mr Chinake said the group remains resilient in ensuring its business models are optimised for the prevailing trading environment, supported by a drive to ensure economies of scale are unlocked across the value chain.

The objective is to attain affordable consumer pricing for all its products.

For Innscor, Mr Chinake said working capital efficiency and free cash flow generation remain paramount in ensuring optimal liquidity management, and to support the Group’s capital expansion and optimisation initiatives in the forthcoming period.

The Group recorded revenue of US$480.409 million for the six-month period under review, representing a 20,2 percent growth over the comparative period.

Revenue growth was underpinned by improved capacity utilisation across the Group’s core manufacturing entities, supported by the introduction of new product categories, category extensions, route-to-market optimisation and an acute focus on pricing strategy to ensure affordability and convenience to the consumer.

The Group’s interest expense for the period under review was US$4.442 million, a significant reduction over the comparative period charge of US$9.091 million, which was characterised by significant increases in interest rates on local currency borrowings.

Meanwhile, IH Securities  brokerage firm said Innscor’s investments will allow the group further scope to generate revenue as well as further improve manufacturing processes and efficiencies.

However, it notes that consumer liquidity in the remaining half of Innscor’s financial year is projected to be constrained due to the ongoing El-Nino-induced drought conditions, this will likely have a downside of slower volume growth outside of the staples offering in the 2H24.

“Margins will likely remain under pressure from a combination of the increased cost of doing business and the Group opting to cushion the consumer from a 100 percent pass-on of these costs.

“However, the capital expenditure programme is notably now at the tail end, paving way for improved free cash flows in the medium-term, as well as valuation.”