• Sales volumes rose 26%, lifting Dairibord’s operating margin from 4.3% to 6.7%
• Operating cash flow reached US$4.38 million after a marginal outflow in the comparative period
• Borrowings increased to US$13.83 million as three shareholders entered talks over a controlling block

Harare- Dairibord Holdings, Zimbabwe’s biggest milk processor has begun extracting a stronger return from the production capacity built across its factories, with higher throughput now reaching margins and operating cash at the same time that the company is entering a potentially significant change in ownership.

Revenue increased by 28% to US$82.56 million in the six months to June 2026, driven by a 26% increase in sales volumes to 78.3 million litres. This led to profit attributable to shareholders increase by 169% to US$3.25 million, while operating profit doubled to US$5.54 million.

Revenue expanded only slightly faster than physical volumes. Revenue generated per litre increased by about 1.7%, placing the bulk of the improvement on throughput rather than substantial price increases.

Dairibord invested more than US$10 million in property, plant and equipment during 2025 and deployed another US$3.87 million through purchases and advance payments for plant and equipment during the first half of 2026. The recent investments included additional capacity for Cascade at the Simon Mazorodze factory, expansion of maheu production at Chitungwiza and the Chipinge facility commissioned in December.

Those assets are now carrying significantly larger volumes through the production system. Cascade bottled volumes rose 68%, Pfuko maheu increased 43%, Fun n Fresh advanced 56%, while Quench cordial grew 82%. The beverages portfolio as a whole increased 33% to 52.8 million litres and accounted for 67% of total group volumes. Foods increased 30% to 7.3 million litres.

As a result,  gross profit increased 37% to US$21.69 million while cost of sales rose 25%. That lifted the gross margin from about 24.5% to 26.3%. Operating profit increased faster still. The operating margin moved from 4.3% to approximately 6.7%, while the EBITDA margin improved from about 6.7% to 9.3%.

This is the conversion Dairibord’s investment programme needed to produce. Capacity has limited economic value when utilisation remains low. Once additional production moves through largely established factories, depreciation, management costs and portions of the manufacturing overhead are spread across larger output. Incremental sales can then deliver faster growth in operating profit than in revenue.

Dairibord is beginning to show that operating leverage. Selling and distribution costs increased 16%, well below the 28% revenue increase. Administration expenses grew 35% to US$6.03 million, placing a separate cost line under pressure, yet the overall operating expense structure still allowed operating profit to rise by approximately 101%.

The composition of the growth also deserves attention. Raw milk utilisation remained virtually unchanged at 20.4 million litres despite total sales volumes increasing by more than 16 million litres.

Liquid milk volumes increased 8% to 18.2 million litres due to constraints in raw milk availability.

The larger incremental contribution came from beverages and foods. Dairibord is therefore extracting growth from a broader consumer products platform whose output is increasingly determined by installed processing capacity, brand demand and route to market alongside the availability of raw milk.

That reduces the extent to which group volume growth has to track raw milk intake directly. It also places a larger share of execution on categories such as beverages, yoghurt, ice cream, sauces and maheu.

Beverages provided most of the volume expansion while consolidated margins improved. The next test comes when the current exceptionally high growth rates across individual brands begin to normalise.

Capacity utilisation still has to protect margins once the easiest volume gains from newly commissioned production lines have been captured.

The cash flow statement provides stronger evidence that the investment cycle is progressing. Dairibord generated US$4.38 million from operations during the first half, compared with a marginal US$38,322 cash outflow in the same period last year. Cash closed June at US$4.01 million, up from US$3.23 million at December and more than three times the US$1.31 million held in June 2025.

Operating cash generation was sufficient to cover the approximately US$3.86 million of investing cash outflows recorded during the period. That marks an important improvement in capital conversion.

However, interest bearing borrowings increased from US$11.63 million at the end of 2025 to US$13.83 million in June, an increase of about 19%. Most of that borrowing is denominated in US dollars, carrying interest rates ranging from 8% to 13%. The smaller ZiG facilities carry rates of between 45% and 47%.

Finance costs consequently increased 58% to US$1.15 million.

For now, earnings have expanded faster than the financing charge. Operating profit covered finance costs about 4.8 times during the half year, compared with roughly 3.8 times in the comparative period. That provides Dairibord with room to carry the current debt load while capacity utilisation continues improving. The financing burden becomes more demanding if the next stage of growth continues to depend on additional borrowing after the major production investments have already been installed.

Prepayments reinforce that point. They increased to US$8.37 million from US$2.38 million at December, placing more than 11% of Dairibord’s total assets in advance payments by June. The group says the increase relates to payments for capital equipment, raw materials and packaging required to secure critical inputs.

Trade and other receivables also increased 31% to US$9.35 million. The cash conversion achieved during the period therefore occurred alongside significant capital being committed ahead of delivery and larger amounts sitting with customers.

 Dairibord needs both balances to convert efficiently during the second half. The company is already carrying US$18.8 million in trade and other payables and US$13.83 million in interest bearing debt. Working capital expansion that consistently outruns revenue would eventually require another funding layer.

The current half year has avoided that outcome through stronger profitability and operating cash generation.

The board declared US$773,723, equivalent to 0.22 US cents per share. The distribution represents about 24% of first half attributable profit, leaving most of the earnings inside the business as Dairibord continues funding capacity and working capital.

The ownership development announced after June places these operating numbers into a second context. Three shareholders whose combined holdings exceed 51% have informed the board that they are negotiating with an unnamed third party over the potential acquisition of a controlling block in Dairibord. No transaction price or financial terms have been disclosed.

The eventual valuation will therefore arrive against a substantially stronger operating base than Dairibord carried a year earlier. An incoming controlling shareholder would inherit a company generating 26% higher volumes, wider gross and operating margins and positive operating cash flow.

The same balance sheet carries higher borrowings, rising finance costs, US$8.37 million in prepayments and a raw milk base that remained flat during a period of rapid finished product expansion. Those factors determine how much of the recent earnings improvement can be treated as repeatable operating capacity.

Regional expansion remains at an early stage.

South African revenue grew 38% to US$722,335, representing less than 1% of group revenue, while exports fell 30% after management redirected product toward domestic demand. Dairibord therefore generated its current earnings acceleration primarily through Zimbabwe.

That concentration has produced strong numbers under the relatively stable inflation and exchange rate environment experienced during the first half. It also leaves the business exposed to the durability of domestic consumer demand, local funding costs, utility reliability and the availability of agricultural inputs.

The South African operation has yet to reach a scale capable of materially diversifying that exposure. Dairibord enters the second half with three operating markers that can establish whether the improvement has become structural.

The first is margin retention. Operating margin has risen to 6.7%. Holding it around current levels as volume growth moderates would establish that capacity utilisation has permanently improved the cost structure.

The second is cash conversion. Operating cash generation now covers current investment expenditure. That position needs to survive higher receivables and the large prepayment balance without another material increase in borrowings.

The third is raw milk supply. Management plans to continue supporting dairy farmers through out grower programmes. Higher milk intake would open another source of growth in liquid dairy categories and reduce the constraint management identified during the half year.

The prospective control transaction adds a fourth marker. Any price ultimately attached to the controlling block will provide an external valuation of the earnings capacity Dairibord has rebuilt through its investment programme. The first half has already improved the underlying economics entering that process.

Volume growth now has to continue without requiring debt to rise at the same pace. Prepayments have to become productive inventory and equipment. Receivables have to convert into cash. Recently installed capacity has to hold the margin improvement after the initial surge in utilisation.

If Dairibord delivers those movements through the second half, the 2026 result will establish that the investment cycle has moved from capacity construction into sustained returns. Failure to hold the cash and margin gains would leave the company with stronger factories and higher volumes while a larger funding burden absorbs part of the economic return the new capacity was built to produce.

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