- Profitability was hampered by ZWL27 billion in exchange losses
- Loss After tax amounted to ZWL4 billion
- However, there was significant increase in raw milk intake
Harare- Dairibord Zimbabwe Limited, the largest dairy products processor listed on the Zimbabwe Stock Exchange (ZSE), has reported a loss after tax of ZWL4 billion for the six months ended 30 June 2023. This represents a significant 157% decline from the profit of ZWL7 billion recorded during the corresponding period in the previous year. The company's financial performance has been adversely affected by the devaluation of the local currency, which has had a detrimental impact on its earnings.
The company incurred foreign exchange losses totalling ZWL27.49 billion, with foreign exchange losses amounting to ZWL42.55 billion. These financial losses reflect the adverse effects of currency devaluation on the company's operations and financial obligations. The significant amounts involved demonstrate the magnitude of the challenges faced due to the volatility in foreign exchange markets during the specified period.
During the period of six months leading up to June 30, 2023, the Zimbabwe dollar experienced a significant depreciation of 88% against the US dollar. This decline was observed from ZWL776 per dollar at the end of January to ZWL6326 per dollar at the end of June. Notably, between May and June alone, the Zimbabwe dollar depreciated by 83%, falling from ZWL1070 to ZWL6326 by the end of June. This sharp devaluation represents a record decline since the reintroduction of the Zimbabwe dollar in 2019.
In the company's half-year financial report, the chairperson Josphat Sachikonye, highlighted that the rapid depreciation of the local currency led to significant foreign exchange losses primarily due to obligations denominated in foreign currencies. This depreciation of the local currency created unfavourable conditions for the company's financial performance, resulting in increased financial losses related to foreign currency transactions.
“The foreign exchange losses weighed down the performance of the business to churn out a loss for the year,” Sachikonye said.
Despite the challenging financial situation, there was a positive trend in terms of raw milk utilisation. The overall raw milk utilization by processors grew by 9.19% to reach 42.078 million litres. Dairibord utilised 14.226 million litres utilized which was a 16% increase compared to the same period in the previous year.
Notably, Dairibord accounted for 34% of the total raw milk received by processors, indicating its prominent position in the market and its ability to effectively utilize available resources. This positive growth in raw milk utilization showcases the company's efforts to maintain its production levels and meet consumer demand despite the prevailing challenges.
“The sustained growth continues to buttress Dairibord’s apex position as the largest dairy processor in the nation.”
The cumulative sales volume performance during the period showed improvement compared to the same period last year, with total sales volumes growing by 9%. 64% of the volumes sold during this period were in foreign currency, which is a significant increase from the 39% recorded in the comparative period. This indicates a strengthening ability of the business to generate foreign currency.
The sales volumes of Liquid Milks experienced a 6% growth, largely driven by 32% increase in Chimombe volumes. The Beverages segment also demonstrated a significant uptick in sales volumes, with a remarkable 16% growth. This growth was attributed to capital investments made in this revenue segment, which improved production throughput and subsequently boosted sales.
In contrast to the positive sales volume growth in other segments, the foods category experienced a decline of 23% compared to the previous year. This decline was due to inconsistencies in the supply of quality inputs, which directly affected the production of peanut butter and salad cream and a depressed demand for ice creams during the period.
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