ADVISORY firm IH Securities has projected a 395% rise in revenue at the Zimbabwe Stock Exchange-listed conglomerate, Innscor Africa Limited, during the year to June 30 2021, underpinned by high consumer spending as lockdown restrictions have eased.

IH projected that the economy will revert to normal in the coming months as governments reopen economies and vaccines flow into most African markets to prevent the spread of COVID-19, which affected consumer-facing businesses in 2020. In an analysis of Innscor’s financial results for the half year ended December 31 2020, IH said revenue would rise to $55,19 billion during the full year to June 30 2021, from $11,16 billion during the same period last year.

However, while the revenue rise will be significant, most of it could have been driven by inflationary pressures in the country, where recent price hikes have triggered fears of currency depreciation.

“Change in consumer spend is looking to be the biggest driver of growth for the group as low disposable incomes in the most recent past weighed on volume performance,” IH said.

“We believe that Q3 (third quarter) volumes will come in weaker relative to 1H21 (first half of 2021) due to muted demand which was as a result of the strict lockdown imposed in the first two months of the year. We, however, expect a volume recovery in Q4 as trading hours normalise and economic activity picks ups,” the report noted.

In March last year, government rolled out blanket lockdowns that resulted in the closure of most firms  to contain the spread of the pandemic as it wreaked havoc across continents. Government only reopened the economy in October, but after extensive damage had been done in several sectors where Innscor has interests.

These include the leisure and tourism sector, as well as furniture production among others. With the 2020/21 agricultural marketing season just weeks away, IH Securities projected that the liquidity that will be unlocked through produce receipts will drive a rebound in consumer spending “which we foresee trickling especially into consumer-facing names like Innscor (and) driving up volumes and the top line.”

“Management has committed to adapting their operating models according to the current environment, this includes balancing volume objectives with appropriate return levels, carefully managing the overhead cost profile while also ensuring balance sheet value remains protected,” the firm said.

“Given their track record, we are optimistic that the businesses will continue to adjust their strategies and plan accordingly to ensure viability and profitability of the group’s operations,” added the report.

Volumes in the majority of Innscor’s operating units closed in the positive territory during the review period.

The bakery division experienced a 26% increase in volumes as flour availability improved. Volumes at National Foods Limited yielded a 25% uptick to 264 000 metric tonnes owing to improvements in the trading environment while Profeeds recorded an 18% improvement in feed volumes, with the segment focusing on diversification of its operations. In the protein segment, Colcom reported a rebound in performance as sales volumes increased 31%, with processed product volumes rising 199%.

Irvines recorded a 10% growth in table eggs production off a high base effect, while frozen chicken and day-old chick volumes were up 6% and 14%, respectively. Owing to continued growth of the retail network, volumes at AMP Group, one of Innscor’s units, improved by 9% against the prior period.