Dairibord cuts losses, strives to remain afloat
By Oliver Kazunga
DAIRIBORD Holdings Limited narrowed its losses by $2,8 million to $480,546 as at the end of June this year from $3,3 million in the same period in 2012 as it strives to remain afloat.
Growth appeared firm in the half year of 2013, with profit jumping 39 percent while revenue climbed 14 percent. But the growth in 2013 full year revenue eased to 11 percent while profit surged only 1 percent.
The company’s revenue for the interim to June 2014 retreated 11 percent to $43,7 million weighed down by a six percent decline in volumes.
Dairibord is now battling to buck the trend of declining revenue, profit and volumes through a series of cost cutting initiatives that include own milk production, retooling, staff cuts and new products.
Volumes sold were 6 percent down at 29,985 million litres. Liquid milk volumes recorded two percent growth, but foods and beverages declined by 14 percent and 11 percent, respectively.
Dairibord said volumes sold for liquid milks in Zimbabwe were up by nine percent.
Weak performance in Malawi negatively impacted overall growth of the milk portfolio.
In Zimbabwe, Chimombe 250ml line extension, Chimombe carton tetra, Lacto and Steri milk bolstered performance.
The company’s board chair Dr Leonard Tsumba said in a statement accompanying the group’s unaudited financials for the period ending June 30, 2014 that an operating loss of $627,399 was recorded during the period under review compared to an operating loss of $3,1 million in the prior year.
“The 2013 operating loss included non-recurring costs of $4,264 million. During the period under review, focus was directed at consolidating the gains from the plant rationalisation process embarked on in 2013.
“Overhead costs benefited from that rationalisation process and were eight percent below 2013. The loss would have been higher if the rationalisation programme had not been undertaken,” said Dr Tsumba.
He said despite the significant improvement in cost containment, the decline in revenue performance impacted negatively on profitability.
“The group embarked on an aggressive investment programme, tailored to support product lines with growth potential. As such, capital investments for the half year were at $4,872 million, spent on the maheu processing and filling equipment, aqualite plant, bulk yoghurt filling equipment and ice cream plant,” he added.
The group, he said, was coming up with new products in a bid to increase revenue streams and its share of consumers’ disposable income and the research and development function continued to develop alternative product solutions.
Against this background, the group successfully launched the Dairibord Pfuko-Udiwo/Maheu, a traditional beverage into the Zimbabwe market.
“Borrowings increased by 37 percent to $9,7 million. The funds were utilised to support the group’s investment programme for new products and capacity development.
“Although the group recorded an operating loss, net cash generated from operations remained positive at $0,3 million, compared to $1,9 million generated in the previous year. The decline was attributable to increased working capital requirements to support the new products,” said Dr Tsumba.
He said according to the Zimbabwe Dairy Services Department, national raw milk production in the country recorded a marginal increase of one percent to 26,8 million litres.
The group’s share of the total raw milk produced in Zimbabwe remained at 40 percent. Raw milk volumes received from farmers were one percent up on 2013.
“During the period under review, the group imported 90 heifers under the heifer importation programme. Another batch of heifers…bringing the total to 180 heifers. Milk supply development will remain the group’s top priority going forward, and resources will be deployed to support initiatives to grow milk volumes as well as reduce the cost of milk production,” he said. Chronicle