Volume growth to be driven by beverages and foods
Overall sales volumes grew by 11%
Harare - Milk processor, Dairibord Holdings says its main thrust going forward is on volume growth to close the gap between demand and supply in most of its product categories.
In a statement accompanying the Group’s financial results for the half year ended 30 June 2022, Dairibord said the volume growth will largely be driven by the beverages and foods benefitting from the commissioning of the plant and equipment for additional processing capacity in the third quarter of the year.
During the half year, overall sales volumes grew by 11% and 40% of the total sales volumes were sold in foreign currency with 8% going into the export markets and 32% through the domestic market.
“Liquid Milks’ contribution to total volume was 28%, Foods 10% and Beverages 62%. This affirms the growing contribution of non-milk product categories and product portfolio diversification, in line with our “more than just milk” strategy,” the Group said.
Concerning raw milk, Dairibord highlighted that according to the Ministry of Agriculture’s Dairy Services Department, Zimbabwe’s first half of 2022 milk intake by processors rose 17% to 38.96 million litres from 33.42 million litres in the comparative period.
Dairibord utilized 12.29 million litres, representing 32% of the total intake by processors and as such, the Group retains its position as the processor with the highest milk intake, albeit at lower levels.
“The price of stock feed continued to rise in line with food inflation pressure. The Group has elevated initiatives for aggressive milk supply development for low-cost and high-volume milk production. The long-term benefits will be competitive local milk prices, import substitution of milk powders and opportunities for export growth,” the Group said.
Meanwhile, inflation-adjusted revenue for the period grew by 40% to ZW$17.12 billion driven by growth in volumes and moderate price adjustments to preserve margins.
The Group experienced significant cost increases on account of imported inflation and price volatility arising from exchange rate movements.
Cost of sales grew by 37% in inflation-adjusted terms driven by sharp increases in material costs and utilities while overheads grew by 30%, but the increase was however at a rate lower than revenue growth, benefiting from management’s cost containment initiatives.
Resultantly, the Group’s operating profit grew 140% to ZW$1.26 billion compared to ZW$524 million in the prior year. The operating profit margin for the period was 7% up from 4% in the prior period.
At ZW$462 million, net finance charges for the period were nominally higher than last year driven by an upward trend in interest rates.
Looking forward, the Group says high cost and erratic supply of utilities mainly electricity and water are expected to persist.
“High cost of borrowing and short tenures will pose difficulty for business to bridge working capital cycle gaps and fund investments in plant and equipment for growth,” Dairibord said.
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