Innscor Africa pumps US$70m into expansion
INNSCOR Africa says it has approved a US$70 million investment aimed at expanding operations and building a new flour milling plant in Bulawayo that it expects to commission in 2022.
The diversified conglomerate, in its financials for the year ended June 30, 2021, also said overall performance for the year was underpinned by capacity utilisation recovery, and augmented with the benefits of lower levels of inflation.
“The group remains hopeful that the positive trajectory over the past year will be sustained, and to this end, our management teams are currently executing on our short-term investment pipeline of US$70 million.
“The investment initiatives covering on-going business optimisation and expansion within existing business units are now in various stages of implementation and will continue to be phased in over the coming financial year,” Mr Addington Chinake, the group’s chairman said in a statement of the financial results.
He said the progressive policy changes initiated by the Government during the year under review were particularly encouraging, advancing further gains by the country.
“However, through policy consistency, the removal of the remaining distortionary and arbitrage effects, and through the implementation of clear and non-conflicting laws and regulations, the economy is poised for further growth,” Mr Chinake said.
During the period under review, the group registered significant volume recovery across all business units, driven by firmer demand, which allowed for a trading-oriented focus to be adopted within all operations.
Mr Chinake said an above-normal 2020/21 rainfall season also contributed to the general economic improvement, as the country emerged from an extended period of drought, giving rise to increased production and supply of key local raw materials such as maize and wheat.
“The stable operating environment also gave rise to various corrections within the real cost base of our businesses,” he said.
As a result, the group posted revenue of $56,48 billion during the year under review, representing a 406 percent increase from $11,15 billion in the comparative year.
“Revenue growth was achieved on the back of volume growth across all businesses as the introduction of new products, increased capacity utilisation in existing and new categories, access to a growing informal market and a market sensitive pricing strategy all aligned to provide a pleasing result,” he said.
He said the group’s financial income continued to be dominated by exchange gains, whilst fair value adjustments on biological assets were impacted by the convergence of market and book values.
Fair value adjustments on listed equities were lower by 85 percent against the comparative year, indicative of the extreme levels of inflation that occurred during the 2020 financial year, this contrasted against the much lower inflation levels experienced in the current year.
Mr Chinake said 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 whilst gross margin levels approached more normalised levels, as inflation-induced distortions dissipated.
“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 terms of individual business review, leading the volumes growth was the group’s grocery division which saw a 74 percent surge in sales, benefiting from competitive pricing for rice and salt.
The Flour Milling division recorded volume growth of 43 percent over the comparative year, supported by strong consumer demand, especially within the pre-pack category.
“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,” Mr Chinake said.
Meanwhile, the group’s bakery division saw a 36 percent uptick in sales which the group accredits to smooth supply of raw materials with a stable cost.
“This was a pleasing result, and was enabled by a reliable and consistent supply of key raw materials, coupled with cost stability, and which allowed for pricing consistency,” Mr Chinake added.
The Colcom division delivered a 34 percent growth in sales while production ticked up 54 percent, Irvine’s eggs volumes came in 8 percent higher while stockfeed, chicken, and day-old chicks saw 33 percent, 21 percent, and 29 percent respectively in the half year.
The maize milling business was the only segment that lagged after recording a 32 percent dip in volumes which the group says is a result of “intense competition from imported maize.
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