Increased output spurs Dairibord performance
BUSINESS REPORTER
Zimbabwe’s largest milk processor, Dairibord Holdings says improvements in production output and improved distribution networks improved the company’s sales volumes by 14%.
In the first quarter trading update that ended March 31, 2023, Dairibord acting company secretary Muarice Karimupfumbi said the performance for the quarter was a good start for the year and the business will drive growth for the rest of the year.
“Sales volumes for Q1 were 14% above the same period last year supported by investments in capacity to meet market demand.
The business demonstrated steady volume growth month on month in Q1 exiting at 14% versus last year.
“The performance was driven by a sustained increase in production output and improved distribution across the country,” Karimupfumbi said.
According to the Dairy Services unit of the Department of the Veterinary Services of Zimbabwe, national raw milk production grew 5% compared to the prior year and milk received by processors grew 8% to 20.747m litres.
Raw milk processed by the company at 6.863m litres was 7% ahead of the same quarter last year and accounted for 33% of the milk received by processors and this growth was directly translated into sales growth of the liquid milk segment.
Foods contracted by 8%, milk grew by 7% and beverages grew by 20%.
Volumes sold in US$ increased by 68% to 15.3m litres and accounted for 58% of the total sales up from 39% in the same quarter last year.
Karimupfumbi said the operating environment remains challenging and globally, economic growth will be slow due to the overhang of the Covid-19 pandemic, increased interest rates, and the effects of disruption to global supply chains.
Erratic supply and high cost of quality water and electricity are expected to persist, increasing the cost of production, and disrupting operations.
“Management will continue to engage in strategic partnerships and explore initiatives for alternative energy models and efficient production methods,” Karimupfumbi said.
Management will optimise the newly installed capacity for volume growth in 2023 and will continue to seek value-adding opportunities.
In February and March 2023, the Reserve Bank of Zimbabwe reduced the lending rates from the previous 200% to 150% and 140% respectively. Despite the reduction, inflation on the ZWL continued to soar, putting pressure on business performance.
The adoption of the use of the blended Consumer Price Index to track inflation saw the year-on-year inflation as of March 31 2023 at 87.6% against a high of 285% in August 2022.
Karimupfumbi said the absence of separate ZWL$ inflation indices will cause challenges in ZWL$ reporting going forward.
In the outlook, Dairibord will leverage initiatives in raw milk production growth, diversified product portfolio, effective pricing models, and route-to-market strategies for sustained growth.
Cost containment and cost reduction through improved productivity and efficiencies are also key focus areas to improve profitability, the company said.
