- The company is bullish on outlook
- This is underpinned by its latest investments
- However, a lot of headwinds awaits
Harare- Dairibord Zimbabwe Limited, the largest milk processor listed on the Zimbabwe Stock Exchange, has made a bullish outlook based on recent investments that are expected to boost production and enhance profitability.
Despite the presence of headwinds such as power outages and high costs in accessing quality water, the company is optimistic about its prospects and expects to focus more on value addition and cost containment.
“Erratic supply and high cost of quality water and electricity are expected to persist, increasing the cost of production, and disrupting operations,” said the company’s chairperson Josaphat Sachikonye in a statement accompanying the Company’s latest annual report.
“Management will continue to engage in strategic partnerships and explore initiatives for alternative energy models and efficient production methods,” Sachikonye said.
The Company undertook several capital investment projects in FY2022 including the third Maheu line, drinking yoghurt line, third blow moulder for Steri milk bottles, and new chilled water plant.
These, will have have a positive impact on the company's production capabilities. These investments will allow the company to increase production of its popular Pfuko brand, enter a new market segment with its new product Yoggie, and increase the production of its flagship product, Steri milk. The new chilled water plant will optimize production capabilities and improve profitability.
The company's focus on value addition and cost containment is expected to help offset losses related to power challenges and the high cost of quality water. By adding value to its products, Dairibord Zimbabwe will increase its profit margins and generate higher revenue.
Meanwhile, cost containment measures will involve improving productivity and efficiency, reducing production costs, and streamlining distribution channels.
However, the company will face several challenges, particularly related to the political and economic situation in Zimbabwe, after the 2023 general elections. Inflationary pressures, exchange rate volatilities, western sanctions, and depreciation of the Zimbabwe dollar against the US dollar may affect the company's profitability and market share. High production costs associated with milk production, intense competition, and the reduction in the number of dairy farms may also pose challenges.
Despite political and economic challenges, due to climatic hazards, the company may succumb to drought spells. Drought spells have significant impacts on the dairy industry in several ways. Droughts hinders the availability of feed and water for dairy cows, which can affect their health and milk production. Inadequate feed and water can cause cows to become stressed, leading to reduced milk yields and lower milk quality. In extreme cases, farmers may need to sell off their cows or reduce their herd size, which can result in a decrease in milk supply and increased prices.
Because of that, droughts affect the cost of feed and water for dairy farmers. As the demand for feed and water increases during a drought, the prices of these inputs can rise, making it more expensive for farmers to produce milk. This w il lead to higher production costs and lower profit margins.
Despite these challenges, Dairibord Zimbabwe can benefit from the growing demand for milk products globally by expanding its operations, improving production capabilities, and exploring new markets.
The company will need to focus on cost containment measures, explore alternative energy models, optimize production processes, reduce wastage, and streamline inventory management to improve its productivity and efficiency while reducing costs. By leveraging raw milk production growth and diversified product portfolio, Dairibord Zimbabwe can position itself for sustained growth in the global milk industry.
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