Thursday, 2 June 2016

We Are Operating in a Storm, Says Dairibord

ZIMBABWE'S largest milk processor, Dairibord Holdings, says the business environment in the country was now more difficult than the company had anticipated, resulting in revenue during the first four months of the year declining by six percent

The company said it would focus on increasing sales and manage operational costs to improve revenue.

Key drivers for the business during the first quarter of the year were liquid milks and beverages volumes, which were ahead of prior year. Steri Milk, Cascade, Pfuko Udiwo Maheu and line extensions also performed well.

"The current operating environment is more excruciating than anticipated; we are operating in a storm and are seeing heavy headwinds ahead," Dairibord chief executive officer, Anthony Mandiwanza, said at the company's annual general meeting.

We Are Operating in a Storm, Says Dairibord
Without giving figures, he said the group's operating profit margin had remained flat at one percent in the review period.

Mandiwanza said a shift towards basic products continued during the first four months of the year as consumers stretched the dollar, resulting in a reduction in average prices.

He said measures had been taken during the period under review to reduce costs, and average material costs were down 11 percent while overhead costs decreased by nine percent.

"We do not see the situation improving at least up to the end of June but we are quite focused on areas where we think there are opportunities for growing the business and to reduce our costs," he said

Dairibord currently enjoys a 40 percent share of the local market ahead of other dairy operators, Dendairy, Kefalos and Alpha Omega Dairy.

The business continues to face challenges as the drought experienced during the just ended rainy season called into question the group's commitment to expand the heifer herd, which they indicated they will further invest on.

Mandiwanza indicated they expected prices to fall further in 2016 but said the group hoped to defend and grow margins through an increase in volumes.

This will be a challenge and any setbacks in driving volumes would severely impair margins. Improved performance should see the company benefitting from lower borrowing costs.

The business operates in a highly competitive and deteriorating environment and there continues to be scepticism among investors and shareholders who say the group has not declared a dividend in the past eight years even though it has been buying back its own shares from surplus cash.

At the last annual general meeting, the board received shareholder approval for a share buy-back.

"It is now eight or more years since shareholders got a dividend from Dairibord and as shareholders we have serious questions for the board and management," said one shareholder in questions sent to this newspaper.
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