Source: Innscor’s revenue breaches $1bn mark | The Herald September 30, 2019
Diversified Industrial conglomerate, Innscor Africa Limited defied the challenging economic environment and reported a surge in profitability for the year to June 30, 2019, on good product mix and volume growth.
According to Innscor, an improved product mix, good strategic raw material positions, and well-controlled overheads combined with volume growth and replacement pricing policies gave rise to an operating profit of $258 million which represented a 234 percent growth over prior year.
Profit before tax came in 371 percent ahead of prior year to $296 million while overall headline earnings per share rose 412 percent to 31,19 cents for the year.
During the year under review, profit for the year jumped 390 percent to $238 million from prior year’s $48 million.
“Given the prevailing trading conditions, this was a satisfactory result,” said group chairman, Addington Chinake in a statement accompanying the group’s financials.
“The overall performance of the group over the past year has been extremely positive, and has been achieved in a challenging and ever-changing economic environment.
“The economy, however, is currently adapting to the introduction of the local currency, and is experiencing significant reactions in this regard with inflation, foreign currency and liquidity shortages, severe erosion of disposable incomes, and energy shortages being some of the issues faced by our businesses on a daily basis,” he said.
At $1,286 billion, revenue was 104 percent ahead of comparative year driven by volume growth in all businesses other than the bread and flour categories which experienced wheat and flour shortages throughout most of the year.
Revenue was also affected by the necessary adjustments to average selling prices necessitated by the need to be able to replace raw materials in an inflationary environment.
“Exchange losses dominated the financial loss account, but this was countered by positive fair value adjustments on the Group’s livestock and listed investments.
“The depreciation charge of $32,5 million was almost double that of the comparative year and arose from the re-basing of fixed assets in February 2019 following the functional currency change,” said Mr Chinake.
According to Innscor, interest costs grew over the comparative year as a result of the utilisation of increased borrowings although this was largely inflationary.
Innscor’s associates delivered a 319 percent increase in the group’s share of equity accounted profits, with positive performances across the board.
Net gearing came in at 5,69 percent compared to 8,35 percent in the prior year. Cash generated from operating activities was low at $39,477 million for the year under review, with much of the profit being deployed to maintain strategic raw material positions, in order to preserve balance sheet value. Industrial giant recorded $70,2 million in capital expenditure for critical maintenance projects, as well as a number of capability and capacity enhancement projects across the group.
Total assets grew 220 percent to $1,6 billion.
The bakery division registered an 8 percent volumes decline largely a result of constrained flour supply which severely limited the operation’s ability to service the market adequately.
The business, however, continues to operate within the confines of a regulated pricing framework and consequently operating margins have been heavily compressed by severe cost inflation not only on flour, but on a number of other key expense lines that have a high portion of foreign content such as pre-mixes, repairs and maintenance and fuel.
At National Foods, the company recorded a solid performance for the period on the back of a 12,5 percent increase in total volumes to 611 000 driven by an excellent performance by the maize division, where volumes grew by 60 percent over the comparative year.
Associated company, Profeeds, recorded a 35 percent increase in feed volumes and a 23 percent increase in day-old chick volumes over the comparative year, a result arising from the combination of the continuous improvement in the retail platform offering, general recovery of the chicken industry from the AI epidemic, and a well-executed strategic raw material strategy position.
The Colcom division, comprising, Triple C Pigs, Colcom Foods and the newly-created “Simon’s Pies”, increased overall volumes by 12 percent over the comparative year. Fresh pork and processed meats volumes increased by 14 percent, a result of investments in upstream pig production facilities; while pie volume growth of 8 percent was aided by the restructuring of the Simon’s Pies manufacturing line in January 2018.
Meanwhile Irvine’s completed its biological asset re-stocking programme during the year under review following the AI outbreak in 2017. Over the comparative year, table egg volumes increased by 81 percent, with volume growth also being recorded in the day- old chick (14 percent) and frozen chicken (7 percent) categories.
In the outlook period, management says the group will remain focused on adapting their business models to this new environment to take account of prevailing conditions. In this regard, attainment of volume targets and, most importantly, control of the overhead base which is experiencing extreme cost-push, will be key focus areas.
Innscor declared a final dividend of 7,87 cents per share.
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