LEADING research firm EFE Securities has projected that revenues at the listed group Innscor Africa Limited will rise by 45% in full year 2024 to US$1,17 billion, driven by new capital projects.
Innscor’s revenue grew 14,69% to US$804,04 million in full year 2023 (FY23) over prior comparable period, while earnings before interest, taxes, depreciation and amortisation came in at US$91,06 million, 13,5% lower compared to the same comparable period.
Revenue was driven by improved capacity utilisation across the group’s core manufacturing segments, the introduction of new segments, category extensions and route to market optimisation strategies.
Operating income was US$52,21 million, down 38% from last year’s values. However, operating margins fell slightly to 11% from 15% in 2022. Profit before tax (PBT) declined by 40% to US$48,32 million, while profit after tax (PAT) softened 40,7% to US$37,84 million.
“Looking ahead, the operating environment is likely to remain volatile given currency instability, policy uncertainty, supply chain disruptions and forecasted El-Nino induced droughts,” the EFE Securities report reads in part.
“Innscor‘s diversity provides some resilience with different business units benefitting from varying economic drivers. Key strengths are the company's wide geographic footprint, established brands and ongoing investments to expand production capacity.”
The report noted that Innscor would continue optimising manufacturing efficiencies and extracting synergies across its expanded asset base. As such, the researchers said new product innovations and route-to-market strategies were crucial for accessing underserved markets.
“Tight working capital management and capital allocation discipline also help navigate the turbulent conditions. With a robust balance sheet, Innscor is well positioned to consolidate market leadership across segments.
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“However, earnings visibility remains constrained by external shocks and execution risks on major capex projects.”
EFE Securities added: “While the current macroeconomic environment poses a threat to future prospects with regards to aggregate demand, we envisage the group to stay the course leveraging mainly on its diversified operations.
“The group’s strong cash generation capability equally sets it on a platform for growth while reducing leverage of overpriced loans. We expect the improvement in margins to lessen the effect of constrained demand resulting in a 45% growth in full year revenues to US$1,17 billion assuming that the new capital projects gain traction.”
It said sorghum beer segment and other beverages segment would be the major gainers as they tap into markets, which offer opportunities for growth.
“From these, we expect PBT and PAT to come in at US$71,99 million and US$56,2 million, respectively, which is (a) 48% and 45% increase from comparative previous year to obtain a target price of US68,23c.”
In the FY23, the bakery division volumes were stable compared to prior year due to pricing dynamics caused by inflated international wheat prices. This had an adverse effect on bread pricing, which affected demand in the first half of the year.
Volumes are expected to increase into FY24, as the group recently commissioned its US$22 million investment and is in the process of plant automation and upgrading capacity at its Harare manufacturing capacity.
