Zimbabwe’s largest milk producer, Dairibord Holdings Limited says it is grappling with increasing cost of doing business.
In a trading update, Dairibord chief executive officer, Antony Mandiwanza, said costs increased by 452% in the five months to May 31,2021, leaving the group with an operating profit margin of just 7%.
He said costs increases were across the board, from imported raw materials to the cost of borrowing.
“The price of fuel and milk powders increased on the global market and this resulted in an increase in imported inflation,” Mandiwanza said.
He added: “The cost of fuel is becoming a major cost variable driven mainly by the need to procure that fuel in foreign currency, while labour also contributed as a key cost driver.”
Mandiwanza also said the cost of financing the business was higher than prior year as a result of borrowing to support imports of raw and packaging materials.
He said the group had to take a strategic position to hedge against commodity price increases.
“The interest rates were high, upwards of 50% and of course longer working capital cycles. All this contributed to a high cost of financing.”