Innscor forecasts 9% revenue growth – Newsday Zimbabwe

In a trading report published in May, Innscor said its business activities remained focused on ensuring that new investments would deliver expected profits.

Securities trading firm IH Securities predicts that revenue at consumer staples and durable goods producer Innscor Africa Limited will rise 9% to US$876 million in the current financial year on the back of increased production capacity.

In a trading report published in May, Innscor said its business activities remained focused on ensuring that new investments would deliver expected profits.

The manufacturer also noted that overall free cash flow generation remains an important indicator of the group’s performance, supporting future financing and investment activities.

In its analysis of Innscor’s prospects for the year, IH Securities said that Innscor currently has a price target of $0.95, suggesting a potential upside of 106% at current levels.

The increase would mean Innscor would have to raise its share price and increase its market capitalization by $280.98 million.

“According to the latest trading update, cumulative performance for the nine-month period continued to outperform the same period last year, supported by significant investments made to expand production capacity and capabilities across all major manufacturing operations over the past three years,” IH Securities said.

“Volume performance was supported by solid improvement in the milling and bakery value chain, complemented by strong volume growth in the animal feed and protein segments, as well as in the beverages and light manufacturing segments.”

IH Securities added: “We forecast Innscor revenues to increase 9% to $876 million in fiscal year 2024, driven by expanded capacity and route-to-market initiatives. Moderation of cost lines will be key, as well as smooth integration of new investments into operations to drive efficiencies.”

IH Securities has announced that from the beginning of 2024, the value added tax (VAT) status of most essential goods will change from zero-rated to tax-exempt.

“This change has resulted in increased production costs for a number of the group’s key product lines, such as bread, milk, cornmeal, salt and animal feed, and VAT charged on the production of these items is no longer included in the relevant VAT returns,” IH Securities added.

“Net interest expense in 1H24 fell 55% to $4.44m due to loan restructuring, while equity-settled gains rose 233%, boosting net income by 12% to $33.42m. Innscor Group invested $32m in capital expenditure in the six months to December 2023, on top of $125m spent in the previous two fiscal years.”

According to IH Securities, these investments will enable the group to further increase revenues, improve production processes and increase efficiency.

“Margins are likely to remain under pressure due to a combination of increased operating costs and the group’s decision to protect consumers from 100% pass-through of these costs. As a result, we believe the EBITDA (earnings before interest, tax, depreciation and amortisation) margin will decline from 11.3% to 11% in FY24, before gradually improving to a stable 12.5% ​​thereafter,” IH Securities said.

In its trading report, Innscor said bold actions taken by authorities to support growth had prompted the group to change its core business models.

However, the key to Innscor’s profits will be consumer spending, which remains weak due to rising US dollar prices and a shortage of the ZiG currency.

“In July, most households continue to use consumption-based coping measures, such as skipping meals, reducing meal portions, or prioritizing feeding children and the sick, which typically characterize the peak of the lean season,” the food security initiative Famine Early Warning Systems Network (Fews Net) said in its latest food security report.

“Some households in parts of the country that received grain from the government are relying on this food aid as their main source of food. The government has announced plans to resume school feeding programmes in rural and urban areas to help address food shortages, malnutrition and school dropouts due to drought.”

Fews Net added: “The Government has also announced a $1.6 billion 2024/25 Agricultural Input Support Plan, which will be funded by government (40%) and the private sector (60%) to support engagement in the 2024/25 agricultural season and take advantage of forecasted average or above average rainfall.”

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