LIVINGSTONE MARUFU
Zimbabwe’s largest milk processor, Dairibord Zimbabwe Limited’s revenues increased 43% during the quarter to September 30 2020 on the back of the efficiency of the foreign exchange auction system which brought forex rate stability and availability.
Dairibord said the auction system, introduced in June this year, enhanced planning and value preservation.
Most Zimbabwe companies which were accessing forex from the black market are now accessing it from the auction, making the operating environment more stable.
In its third quarter (Q3) trading update, Dairibord’s company secretary Samson Punzisani expects the improved performance to continue into the final quarter of 2020 as the local and regional economies show signs of recovery.
“The introduction of the foreign currency auction system and Statutory Instrument 185 of 2020 improved foreign currency availability and stability resulting in enhanced planning, efficiency and value preservation,” Punzisani said.
He added: “The operating environment for the three months to 30 September 2020 showed improvement on the back of foreign currency exchange rate stability, reduced month on month inflation and relaxation of Covid-19 lockdown restrictions,” Punzisani said.
He said although the impact of Covid-19 continues to disrupt both local and regional markets, increased trading hours and reopening of trading channels resulted in overall improvement in aggregate demand.
Revenue for the quarter in inflation adjusted terms was 43% above prior comparable quarter and 8% above Q3 2019.
Year to date revenue was 8% below the same period in 2019.
The cumulative reduction is on account of depressed H1performance, according to Punzisani.
Year to date operating margins increased to 8% compared to 6% in 2019.
Dairibord remains the processor with the highest raw milk intake and widest milk intake base in the country.
The business focused on ensuring the viability of suppliers through various support initiatives including competitive prices to sustain long term milk supply growth.
Production output grew on the back of improved supply of raw and packaging material, however, materials, labour, electricity, fuel and water costs continued to escalate.
Demand significantly improved in the third quarter with sales volumes growing 32% ahead of Q2.
Growth was recorded across all product categories with liquid milks, foods and beverages growing by 15%, 74% and 50% respectively.
Volumes for the quarter were 10% below Q3 in 2019 showing a recovery compared to the 46% decline recorded in Q2 2020 vs Q2 2019.
While cumulative sales volumes remained below 2019 at 26% down, the trajectory shows a recovery from the 32% decline recorded in H1.
The drive to generate foreign currency revenue and contribute towards the company’s foreign currency requirements continued to bear fruit with year to date foreign currency revenue up 50% from 2019.
Foreign currency liabilities closed the period at US$70.771m (including a long term loan of US$0.302m) down 34% from US$1.161m at the end of June 2020.
The short term liabilities were partly covered by foreign currency cash balances and expected receipts of US$0.312m.
Dairibord remains sufficiently liquid with a current ratio of 1.55 and the group is focusing on optimising the cash management cycle and saw the cash to credit ratio in September improve to 36:64 from 18:82 in December 2019.
Borrowings as at September 30 2020 were ZWL$172.509m up 504% from December 31 2019.
The company is expected to leverage the balance sheet for growth with a gearing ratio of 14%.
Going forward, the business is geared to exploit opportunities presented in a more stable operating environment by mitigating supply chain disruptions and taking full advantage of weather induced demand.
