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Enacy Mapakame

Business Reporter

Innscor Africa Limited is this year expected to inch closer to billion-dollar (US$) annual revenue, as the diversified industrial conglomerate reaps the fruits of its capacity expansion and diverse product mix.

Analysts have projected Innscor 2023 (Financial Year 23) revenue to reach US$800 million.

The group has budgeted US$126 million for capital expenditure between financial year 2022 (FY22) and planned spend for the current financial year,  to be drawn from a combination of both retained earnings and debt funding.

The investment is meant to increase capacity and further widen the group’s product offering.

According to the group, some of the key projects include the new flour mill set to be commissioned in Bulawayo, which will increase wheat milling capacity by around 2 000 tonnes per month. Innscor is also set to commission a new dairy farm in Kwekwe under its Mafuro Farming subsidiary, which will become the single largest raw milk operation in the country.

The group recently launched a new sorghum beer line under the Nyathi brand signalling its entry into the alcoholic beverages market.

In light of these developments, analysts have projected an upturn in the group’s earnings for the full year and going forward.

“We expect that the most aggressive years for revenue growth will be within FY23 and FY24 as investments mature,” said equities and economic research firm IH Securities.

“We are of the view that revenue to FY23, will register at US$811,22 million. Whilst volumes in 1H23 have been weighed down by performances in the flour and maize segments, we believe that the second half of 2023 will see a reversal in fortunes due to the non-renewal of duty-free import on basic goods and services which will cushion domestic suppliers.

“We also foresee organic growth of volumes in other segments of ongoing capacity investments. Second quarter volumes to December versus the same period last year are expected to remain resilient propelled by end-of-year seasonal spending,” added IH Securities.

Given the trading conditions in the formal platforms, management has also been exploring routes to market into the cash-rich informal sector for categories outside the bakeries segment. The group’s diverse product portfolio and its inroads into fast-moving consumer goods (FMCG) is, according to experts, a step in the right direction which should pay dividends in the short to long term.

Expansion of its contract farming initiatives will continue to reduce its raw materials dependency. Farming under contract schemes has grown from 1 000 hectares of maize and soya bean at inception in 2010 to a planned 20 000 hectares in the summer of 2022/2023 going into securing a steady raw material pipeline, reducing import dependency for raw materials.

“In essence, this points to greater influence over its input costs, less exposure to supply side constraints and the ability to defend margins to a greater extent,” said IH Securities.

The group has also maintained market share for key segments with flour milling operations producing over 60 percent of domestic flour output whilst daily bread volumes sold under Baker’s Inn are just under half a million loaves representing 50 percent of the market.

At Colcom, the company processes over 100 000 pigs annually with the bulk of its pig supply sourced from its own farm, Triple C Pigs accounting for over 70 percent of the national market.

In the poultry segment, the company has grown capacity to over 1,5 million day-old chicks per week across Zimbabwe, Mozambique and Botswana. Innscor is also the largest producer of stockfeeds in Zimbabwe while Prodairy has grown its market share in milk processing to 30 percent within four years of commencing operations.

IH Securities said: “Innscor has a firm footprint in the consumer staples segments giving it a monopolistic advantage in the market.”

Additionally, the group has opportunities to further diversify its product offerings in alcoholic beverages, according to the stockbrokers.

Innscor recently migrated to the US dollar-denominated exchange, the Victoria Falls Stock Exchange (VFEX) further, a move that will boost its international profile, regional expansion and foreign currency earnings on the exchange.

The company accounts for 36 percent of VFEX. Already, being a consumer-oriented company, Innscor has started benefitting from increased dollarisation within the economy with 60 percent of the entity’s sales now dollar-based. However, the group is not immune to the challenges prevailing in the economy such as erratic power supplies.