Simbisa hedges against FX movements

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SIMBISA Brands (Simbisa) is eyeing entering into forward foreign contracts with banks and where practicable use local suppliers to substitute imported raw materials to limit the impact of exchange rate movements.
In a trading update for the first quarter ended September 30, 2023, Innscor’s group chief executive, Basil Dionisio, said persistent high inflation rates and currency devaluation remained the most significant operational challenges.
“Management constantly engages with suppliers and service providers to structure funding deals, negotiate and lock in prices and ensure product availability,” Dionisio said.

“Local currency menu price increments will be made to keep pace with inflation whilst remaining sensitive to price elasticity of demand given the environmental pressures on consumer income levels and affordability.”
Dionisio said in Zimbabwe, the domestic unit exchange rate remained relatively stable, but the distortions between the official and parallel market rates continue to create pricing arbitrage opportunities and distortions, making planning challenging and eroding profit margins.
In the group’s regional markets, local currencies continue to create headwinds particularly the Ghanaian cedi and Kenyan shilling. During the quarter under review, the total customer count for the group increased by six percent to 15,6 million from 14,6 million in the same comparative period in 2023 primarily driven by new store growth.
Simbisa’s real average spending increased by one percent year-on-year, driven by higher spending in the Zimbabwe operations.
Locally, customer counts grew by five percent to 10,8 million in the first quarter of 2024 from 10,3 million in the first quarter of 2023, while real average spending grew by six percent year-on-year, with operations successfully keeping pace with inflation without negatively impacting sales volumes.
Customer counts in the regional business increased by five percent to 4,7 million, while real average spending fell by seven percent year-on-year, on the back of local currency devaluation.
Group revenue increased by eight percent to US$74,3 million compared to US$68,7 million in the prior year.
The store count for Simbisa improved from 611 on September 30, 2022, to 656 on September 30, 2023, of which 608 are company-operated counters and 48 are in franchised markets.
“Between June 30, 2023 and September 30, 2023, one new counter was opened in Zimbabwe and nine new counters were opened in Kenya.
“The Zimbabwe operations opened 19 counters between September 30, 2022 and September 30, 2023, with one new counter opened in the quarter under review to close the period with 283 counters,” Dionisio said.