Dairibord raises red flag over harsh operating environment

LIVINGSTONE MARUFU

Dairibord Holdings Limited, a publicly listed milk processor, has raised alarm over a challenging operating environment that has significantly driven up operational costs, squeezing margins and dampening profitability.

The company’s CEO Mercy Ndoro flagged several headwinds undermining the company’s performance, including a mounting tax burden, limited access to foreign currency, and the proliferation of cheap competing products on the market.

“The operating environment was characterised by tight liquidity, limited access to long-term financing for capital expenditure, high borrowing costs, high cost of doing business, escalating compliance expenses, and increased competition,” Ndoro said. “While margins remained under pressure, there was a marginal improvement in profit margin to 3%.”

Key policy changes have worsened the situation.

The introduction of a sugar tax has added financial strain, particularly affecting manufacturers of flavoured milk and other dairy-based beverages.

Additionally, the reclassification of milk from zero-rated to VAT-exempt has raised tax liabilities and curtailed input tax recovery, further impacting cash flow and operational efficiency.

“These developments have led to considerable cost pressures and notable liquidity challenges for the business,” Ndoro noted.

Despite the harsh macroeconomic conditions, the company registered an 18% increase in overall sales volumes compared to the same period last year, with growth recorded across all product categories.

“Beverages grew by 28%, maintaining a positive volume trajectory driven by Pfuko, Cascade, and Natural Joy. Foods grew by 18%, buoyed by strong demand for Yummy yoghurt and Rabroy tomato sauce. Liquid milk recorded a modest 1% volume increase, while Lacto surged by 23%,” said Ndoro.

However, the UHT and Steri Milk product lines declined by 7% and 9%, respectively.

Exports accounted for 8% of total sales, down from 9% in the prior year, as the company prioritised meeting local demand.

On the financial front, Dairibord reported an 18% increase in revenue, largely attributable to higher sales volumes. The company also benefited from the liberalisation of the exchange rate following the enactment of Statutory Instrument 34 of 2025, which brought relative currency stability and boosted market confidence.

Zimbabwe’s national raw milk production for the period stood at 57.2m litres, marking a 3.9% year-on-year growth, according to the Dairy Services Unit under the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development.

Dairibord’s own raw milk intake rose to 20.8m litres—a 4.1% increase—reinforcing its market leadership with a 36.3% market share.

“The sustained growth in raw milk intake is a testament to the ongoing success of the Milk Supply Development Unit, which continues to enhance our sourcing capabilities,” said Ndoro.

Looking ahead, the company remains cautiously optimistic. Dairibord is banking on volume growth, capacity expansion, and innovation to drive recovery. Its 2025 capital expenditure programme remains on track, with new equipment expected to be commissioned in the fourth quarter.

The company is also investing in digital transformation through the implementation of a new Enterprise Resource Planning (ERP) system, which will streamline operations, enhance efficiency, and lay the groundwork for future adoption of Artificial Intelligence (AI).

To navigate Zimbabwe’s volatile economic landscape, Dairibord has adopted a multi-pronged strategy focused on cost optimisation, working capital management, growing exports, and leveraging its strong brand equity.