Listed Zimbabwe food manufacturer, Dairiboard Holdings Limited Zimbabwe(DHLZ) is pulling out of Malawi, it has been learnt.
Anthony Mandiwanza, DHLZ chief executive, revealed that the decision to pull out of Zimbabwe's north eastern neighbour was reached after realising that there is no capacity to internally inject fresh capital to turnaround the subsidiary.
Speaking to shareholders at DHLZ 2018 Financial Results briefing function, Mandiwanza said that a decision pull out had been reached after careful consideration.
"Our decision came after looking at various options like attracting investors who may want to inject equity so that we can best turnaround the business but this plan was not successful.
"We then tried to look for assistance from the banks and they were willing to give support towards capacity building but they also needed security from the holding company which we were not able to get hence a final decision is that we needed to pull out of the entity," said Mandiwanza.
He added it made no sense because the subsidiary was not making profit.
The Dairiboard boss said that under normal circumstances a holding company has an obligation to support a subsidiary that has potential to generate profit.
"However, we were not able to capacitate the Malawian business by way of investment because in Zimbabwe, where we reside as the Holding company, we were not able to use our balance sheet to capacitate Dairiboard Malawi and as a result the company continues to experience difficulties," Mandiwanza said.
According to DHLZ 2018 financial statements, the Malawian subsidiary posted a loss after tax of US$693 000.
Finalisation of the exit process is anticipated in the second quarter of 2019 and the group intends to retain market presence through partnerships.
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, it reported an operating loss of around US$550 000.
Since 2017 DHLZ has been weighing exit options.
Overally, DHLZ after tax profit increased more than two-fold to US$6, 48 million from US$1, 94 million in the full year ended December 31, 2018, driven by an increase in revenue.
Revenue for the period grew by 28 percent to US$126, 44 million.
The company noted that the operating environment during the period under review had weakened, negatively impacting the company's product supply and the cost of doing business.