Economic volatility dampens Innscor’s bakery division HY2020 performance

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  • Flour outages resulted in reduction in loaf volumes by 45%
  • Market-related pricing approach resulted in consistent supply of wheat and bread

Harare – Zimbabwe’s volatile economic environment negatively impacted the performance of Innscor’s bakery division in the half year ended 31 December 2019.

For much of the period under review, the bakery operation, which falls under the Group’s Mill-bake division operated within the confines of a regulated pricing framework despite the highly inflationary environment that saw prices of most goods escalating in order for companies to retain profits.

Extremely limited flour availability at the necessary pricing level needed to maintain loaf pricing during this price-managed period meant several flour outages and consequently several disruptions to bread production which is the main reason for the reduction in loaf volumes of 45% against the comparative period.

The latter part of the period under review saw Government migrating from a controlled pricing approach to a market-related pricing approach, a policy change that resulted in an immediate return to consistent supply of flour and consequently bread.

Consequently, bread pricing normalised and settled rapidly and whilst volumes remained lower than previous years, the business has therefore been able to adjust and plan accordingly to ensure viability.

­The nationwide electricity load-shedding programme affected all business units under the Innscor Group; this required increased usage of back-up generator facilities, and continual adjustment of manufacturing schedules in an effort to control conversion costs and minimise disruption to production.

Furthermore, the effect of the 2019 drought on local agricultural production has resulted in the Group having to continue to source most of its major raw materials through imports.

Focus in the immediate future for the bakery operation will be on re-building the volume base, widening the product offering to cater for all income levels, investigating sustainable auxiliary power solutions and further automating production.

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