19 March 2018

Zimbabwe: Dairibord Mulls Malawi Business Closure

Milk processor, Dairibord Holdings Limited, will make a decision on the fate of its Malawi division in the next six months after the unit continued on a perennial loss making path.

Finance director Mercy Ndoro, told an analysts briefing on Wednesday that Dairibord Malawi had continued to be the group's problem 'child', impacting negatively on the group's overall performance.

In the year to December 31, 2017, Dairibord Malawi reported an operating loss of $550 000. Its total revenue for the year amounted to $3,3 million. As such, the group is now looking into the subsidiary's future and expects to make a decision in six months' time.

"The board is in the process of assessing the investment to inform next steps for the business, the process will be concluded in the next six months," said Ndoro.

Overall, the group overturned its previous loss after 152 percent increase in net profit to $1,3 million in the financial year to December 2017 from a $5,4 million loss in the prior year, buoyed by volumes growth and restructuring exercises.

Revenue for the year improved 10 percent to $103 million on volumes growth due to firming product demand. Operating profit increased by 204 percent to $4 million from a $3,8 million loss reported last year. Total borrowings went down to $7,7 million from $10,4 million in the prior year while $2,4 million was invested into property, plant and equipment.

Chief executive officer Anthony Mandiwanza, told the analysts briefing that new product lines helped boost demand for brands while the restructuring programme the firm embarked on early last year reduced overhead by 16 percent.

During the period under review, total volumes increased 8 percent to 89,4 million litres as the firm leveraged on improved installed capacity.

Liquid milks registered an 8 percent volumes growth spurred by the Chimombe 1 litre cartons and steri milk, while revenue was 9 percent up to $33 million. The food category recorded a 10 percent volumes growth, while revenue increased by 14 percent to $27,8 million, which is 27 percent of the group's total revenue.

Volumes in the beverages segment firmed 7 percent to 46,9 million litres on demand in pfuko flavoured drink as well as Fun 'n Fresh and Natural Joy 1 litre cartons. Resultantly, revenue grew 11 percent to $41,9 million, which was 41 percent contribution to group's total revenue.

Net cash generated from operations increased to $6,2 million from $4,4 million in 2016 benefiting from the improved performance.

Total assets reduced to $72 million from $74 million in the prior year.

Meanwhile, Mr Mandiwanza said the group would continue on a cost containment strategy while optimising production to consolidate its market share. He, however, indicated the group would halt the heifer programme citing foreign currency shortages and will adopt the artificial insemination strategy to grow the herd.

"Our strategy will be dairy enhancement programmes and we will look at other options that are cheaper than importing heifers into the country," he said.

The heifer programme has contributed 15 percent of the group's total milk intake. Dairibord declared a dividend of 0,2 cents a share.

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