BAKERS Inn, one of Zimbabwe's largest confectionery producers and a subsidiary of Simbisa Brands Limited, is undergoing significant staff cuts following a major restructuring effort aimed at streamlining its distribution processes.

The restructuring comes after the company incurred a loss of US$1,08 million,  businessdigest can reveal.

Bakers Inn, known for its substantial market share in the confectionery sector, previously handled its logistics independently through Bakers Inn Logistics (Pvt) Ltd, a subsidiary of Innscor Africa Limited.

Simbisa was formerly part of Innscor before being unbundled into a standalone entity in 2015.

However, according to documents obtained by the businessdigest, the company has decided to merge its sales and distribution operations with logistics under a single management structure within Bakers Inn.

This move has resulted in the redundancy of several positions, leading to a wave of retrenchments.

The restructuring was driven by escalating operational costs, which had severely impacted the company's viability.

“Bakers Inn Logistics division has been operating as an independent unit from the Bakers Inn Sales and Distribution division. The business has consolidated them both and this has eradicated the need for parallel structures, especially in the finance and administration department and the human resources department,” the documents, dated July 1,  read in part.

“The employer has undertaken a restructuring exercise, which has resulted in the posts of the selected employees being redundant, thereby necessitating the termination of the contracts of employment by way of retrenchment.

“The move to restructure the company has also been necessitated by high operational costs in an increasingly difficult macroeconomic operating environment.”

The documents reveal that Bakers Inn has been operating at a loss for the past two years, primarily due to high exchange rate losses and the rising cost of doing business.

“For example, the company realised an after-tax loss of US$1,08 million for the nine months ended 31 March 2024 and an audited loss of US$1,14 million for the year ended 30 June 2023,” the documents further state.

“This has been a result of high operational costs in an increasingly difficult macroeconomic operating environment where business performance was impacted by large exchange losses from the weakening of local currency on ZWL-denominated receivables, an increase in the cost of doing business arising from the change in VAT (value added tax) status for the baking industry from zero-rated to exempt.”

The VAT change alone cost the company US$110 000 during the first quarter of the year, according to the documents.

As part of the restructuring, Bakers Inn will bring in independent distributors willing to operate at their own expense.

The high cost of doing business has also led to a 30% decline in sales volumes following price adjustments necessitated by the increased cost structure for the three months ending March 31.

The company also cited a heavy debt burden related to replacing its ageing fleet, which has further extended its loss-making position.

“The company has transferred operations of some of its depots to partners who will assume the responsibility of supplying bread to those areas at their own cost,” Bakers Inn stated in the documents. “This has necessitated the redundancy of many employees in those depots.”

A source close to the matter confirmed the developments, stating that the decision to lay off workers was a difficult but necessary step to keep the business afloat.

“No one likes a retrenchment process. It’s hard for both the employees and the employer,” the source said.

“But in the bread business, we have to make tough decisions to continue providing bread across the country.

“When you’re operating on very slim margins, you must ensure the business remains viable to serve the nation and the people.

“Unfortunately, we have been going through a tough period, losing money, and the business couldn’t continue as it was.”

The source added that the restructuring process was essential for the company's survival.

“We had to make strict and tough decisions to stay afloat. That was the driving force behind this exercise,” the source noted.

“Fortunately, we’ve adhered to all legal requirements throughout the process.”