INNSCOR Africa Limited has engaged government over high taxes amid revelations they were causing cost push pressures on its bottom line.
Treasury is in the process of receiving several submissions from different business membership organisations (BMOs) ahead of the unveiling of the 2025 National Budget later this month.
Most of these submissions by BMOs have pleaded for a reprieve on taxes as the volatile currency is causing massive losses, forcing firms to adopt aggressive pricing that consumers cannot afford.
In the Confederation of Zimbabwe Retailers recently submitted paper, the Treasury was warned of impending bankruptcies and company closures if it took no action to address the deteriorating state of the economy.
Innscor sounded the alarm in its first quarter trading update for the period ended September 30, 2024, released last Friday.
“The group’s management teams continue to deploy focus toward navigating the complex policy landscape and most notably, the cost-push pressure emanating from the adjustment to the value added tax (VAT) status on many basic products which the group manufactures, coupled with the sugar excise duty in the beverage categories; sustained pricing distortions in the formal retail channel and the considerable route to-market regulations have also added to the dynamic,” Innscor said.
“ The group continues to engage with the relevant authorities to achieve sustainable, long-term solutions with regards to pricing, and the impact of the changes emanating from the revised VAT regulations.”
The group noted that power cuts resulted in a heavier dependence on costly, auxiliary power sources, adding more cost push pressures.
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Further, the devastating effects on the El Nino-induced drought for the 2023/24 agricultural season caused a reliance on imported grain adding more cost pressures.
“Currency volatility also ensued for much of the period, culminating in a 43% overnight devaluation of the local currency late in the quarter under review; further monetary policy measures, including an upward adjustment to local currency interest rates and statutory reserve requirements, have further impacted overall market liquidity,” Innscor said.
During the period under review, the group registered solid volume growth in its mill-bake, beverage and packaging segments, driven by the extensive investment programmes now scaling up across the respective business units.
Innscor said this was supported by a significant focus on product pricing to ensure strong volume momentum.
“While the protein segment registered volume growth across many core categories, on aggregate, the segment continues to be impacted by its reliance on the formal retail channel, further compounded by the cost-push pressure relating to the change in VAT status, particularly in the pork category,” Innscor said.
In a breakdown of its divisions, volumes under its bakeries were up 3%, National Foods Holdings Limited (20%), Irvines (17%), Natpak (13%), Prodairy (26%) and Probottlers (20%), from the comparative quarter.
Both Colcom and Associated Meat Packers Group delivered similar volumes during the period, compared to the comparative quarter.
At Innscor’s Nutrimaster and Profeeds (associate), however, these firms registered a decrease in volumes of 3% and 8%, respectively, from the comparative period.
Innscor’s associate firm, Probrands, delivered volumes at consistent levels to the comparative quarter.
“The group is pleased with the progress made during the quarter under review and our management teams will continue to focus towards the overall portfolio strategy, which is centered around achievement of volume targets, controlling the bills of materials and managing variable and fixed costs to set targets,” Innscor said.
“Generation of free cash and the achievement of the requisite returns on shareholders’ equity also remain key focus areas.”
Innscor is one of the biggest firms operating in Zimbabwe, with a listed value of US$269,06 million as of last Friday.
