eBusiness Weekly
Enacy Mapakame
Diversified industrial conglomerate, Innscor Africa Limited, is projected to maintain growth in its earnings supported by capacity expansion initiatives as well as diversity in product offering.
The group recently announced it poured US$56 million worth of investment for the financial year 2023, which will go towards expansion programmes across segments. This comes as the group continues with its ambitious programmes aimed at increasing capacity, production efficiencies and product quality – initiatives that started during the financial year 2021.
“The 2023 financial year will see a considerable number of these projects being commissioned across the group, enabling production capacity increases, adding new product categories, significantly improving product quality and further enhancing production efficiencies; all enabled via the introduction of world-class technologies and plant automations,” said chairman Addington Chinake in an earnings update for FY22.
Capital investments that are set to be commissioned during the financial year 2023 (FY23) include the $25million fully automated bakery facility, a new flour mill, modernised equipment within the protein segment and launch of the sorghum beer line from Buffalo.
Market watchers opine these initiatives will continue to drive growth for FY23 and beyond with revenue seen jumping 23 percent to US$864 million, according to stockbrokers IH Securities.
“We expect revenue for Innscor to grow 23 percent year on year to US$864 million from a combination of volume and pricing,” said IH Securities in an earnings review for the conglomerate.
“For forecasts to remain relevant in the present inflationary environment, we have shifted to a US dollar based valuation of the business.”
Earnings before interests, tax, depreciation and amortisation, is projected to close the year at 13,7 percent and improve thereafter while net margin is, however, expected to soften to a steady state of 7 percent as other once off income lines fall away.
While the group is projected to register growth, the obtaining environment characterised by foreign currency shortages, pose a strain on economic activity and consumer demand, which has also been worsened by policy measures aimed at taming inflation.
IH Securities said: “While contractionary measures from the central bank have succeeded in promoting stability in the monetary space, lack of liquidity has also had the effect of slowing down consumer demand.”
Already, volumes in the Mill-bakes segment for the first quarter of FY23 came under pressure with National Foods volumes softening 18 percent relative to the same period last year.
“However, volumes across other key segments have so far remained resilient exhibiting continued growth despite pricing distortions in some trading channels,” said IH Securities.
Although the business environment is expected to remain volatile in the short to medium term, management at Innscor is also hopeful that consistent, pro-business measures and policies will be employed by Government. These will encourage further expansion investment into local manufacturing initiatives, reduce the country’s reliance on imported goods in the long-term, and result in increased local job creation.
“The prevailing economic conditions remain complex and challenging, however, the group retains its positive outlook as regards macro growth prospects and a medium-term recovery for the economy. Our management teams will continue to adapt and optimise business trading models, with focus being directed to balancing pricing and volume objectives, achieving appropriate levels of margin return, ensuring that overheads are contained, creating bespoke working capital solutions relevant to current market conditions, and, most importantly, ensuring maximum free cash generation,” said Chinake.
