Weak Economy to Affect Innscor Africa

A weak economy that has triggered an erosion of disposable incomes on the market remains the biggest hurdle to the operations of one of the country's largest conglomerates that has been undergoing a restructuring process, researchers at advisory firm, Exotix Partners, have said.

Exotix said the listed Innscor Africa Limited, which has been undertaking an unbundling process, including separately listing Axia Corporation on the Zimbabwe Stock Exchange in May, would have its revenues cut by half post the realignment which is nearing completion.

Other Innscor non-core operations are expected to be disposed of not later than the end of June.

Innscor's revenue of about US$1 billion would decline to between US$550 million and US$600 million post unbundling.

Weak Economy to Affect Innscor Africa

However, the group whose operations span from fast food outlets to the retail sector and croc rearing, says its goal is to return to the usual turnover through organic and acquisitive growth.

Exotix said, however, that short term performance would be weighed down by weak macroeconomic performance. It noted, however, that with a strong balance sheet, Innscor was well positioned to ride out the underlying turbulences.

"There is scope to improve efficiencies, but we think the challenging macro will mitigate progress on this front, and Innscor's recovery over the short term will be muted," the report said.

"It has been faced with shrinking discretionary income and competition from cheap imports, and the recent deterioration in US dollar liquidity has led to, further erosion of consumer confidence and spending power, challenges in paying foreign suppliers.

This implies a challenging year ahead, but we think Innscor is relatively well positioned to see it through," added Exotix.

"It has a strong balance sheet and a good pipeline of raw materials, it is likely to be afforded some priority status by banks given that it imports raw materials for value addition and it has strong brands and dominant market share across key products. We remain positive on the group's long-term growth prospects," the report added.

"Innscor has a strong balance sheet with capital to deploy, and is on the lookout for opportunities within Zimbabwe to enhance and diversify the existing portfolio and regionally, within existing fields of expertise.

"The Zimbabwe situation, while challenging, does present an opportunity to acquire businesses at a discount," said the research sent to clients and the media on June 16.