Innscor scales down bakeries

HARARE - Listed diversified group, Innscor Africa Limited (Innscor), is scaling down its bakeries due to depressed demand in the retail sector.

Its chairperson, David Morgan, said the group’s confectionery division produced disappointing results in the half year to December 2013, with volumes declining 10 percent from comparative period.

“As a result of current market conditions, production in Harare will now be consolidated at the Graniteside facility which houses the four most recent lines,” he said, adding that the remaining site in Harare will be mothballed until demand improves.

Morgan noted that the bakeries unit is also currently undergoing an extensive review of its overhead base so that profit efficiencies are restored.

Last year, Innscor experienced an extremely challenging period as a result of overall depressed economic activity and also due to poor control of overheads in certain core businesses.

The challenges were compounded by subdued margins. During the period under review, Morgan said the group’s basic earnings per share declined to three cents, while headline earnings per share stood at $2,75 cents.

“Notwithstanding the depressed operating results, the group continued to produce strong free cash flow, with cash generated after operating activities amounting to $50,97 million for the six months under review,” he said.

Morgan added that the cash, together with additional borrowings, was mainly deployed towards ongoing fixed asset expansion. The group’s revenue increased by 35 percent to $525 million from $338 million in the prior year, an operating profit of $47,3 million was realised in the period under review.

“With constrained trading conditions currently prevailing locally, it is very important for a number of the group’s business models to be challenged and revised where necessary.

“This will be a major focal point in the forthcoming period and management will work to ensure that overhead bases are adjusted accordingly and are able to withstand any necessary gross margin adjustments,” he said.

Morgan added that in order to enhance this process, Innscor will look to centralise a number of the large expense lines that are common across the different business units.

“The group will look to continue with its regional expansion programmes as it seeks to increase the share of the revenues and profits generated from operations outside Zimbabwe.  “This objective being in pursuit of its ultimate goal of being a truly pan-African organisation,” he said.

Innscor declared a $0,60 interim dividend.

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