ZIMBABWE – Zimbabwe’s leading dairy processor, Dairibord Zimbabwe Limited (DZL), has show-cased a stellar performance in the first half year period ended June 2021, reporting a 65% rise in revenue to ZW$4.2 billion (US$11.6m) from ZW$2.5 billion (US$6.9m) registered in the corresponding previous year.
The solid top line performance was a result of the 54.5% increase in sales volumes and moderate price adjustments to minimise margin compression.
According to the company, demand was firm across all product categories, with sales volumes for the period being 54.5% above prior year, the highest H1 volume performance in the last 5 years.
Volumes in the first quarter were up 18% compared to Q1 of 2020, while Q2 volumes increased by 112% compared to Q2 2020.
The quarterly trend was due to the impact of the level 4 lockdown instituted in Q1, after which market access opened up significantly. The inverse trend was experienced in the previous year where the lockdown was in Q2.
Liquid Milks, Foods and Beverages volumes increased by 22%, 52% and 87% respectively compared to same period last year.
Despite the growth, Group Chairman Mr Josphat Sachikonye admitted that demand still exceeded supply across the product portfolio, particularly in the liquid milks category which is constrained by raw milk supply challenges.
Raw milk utilised during the period was 1% above prior year, while national milk production was 2% down.
Despite the good rains, stock feed prices continued to rise, which negatively impacted milk supply growth.
“The Group remains committed to supporting local farmers to grow milk supply through actively promoting lower cost operating models in a bid to bring prices back to regional parity in the medium term.
“The long-term benefits of increased raw milk production will reduce the dependence on imported milk powders and the associated foreign currency requirement,” said Mr Sachikonye.
During the period under review, cost of sales grew by 72%, against a revenue growth of 65%, on account of increases in costs of materials and utilities driven by exchange rate movements and commodity price increases.
As a result, the gross profit margin shed off three percentage points from 26% to 23 %.
Production efficiencies and cost containment resulted in overheads growing by a lower rate of 53% as compared to revenue growth.
The business achieved an operating profit of ZW$166 million (US$458,000) compared to ZW$137 million (US$378,550) for the same period in 2020.
Meanwhile, the dairy giant processor recently announced its long-awaited merger with Zimbabwe’s second largest milk processor Dendairy, has been called off.
The agreement would have created a strong monopoly in the industry while creating a regional milk processing powerhouse.
However, negotiations for a possible merger between the two dairy entities have collapsed with Dairiboard, which is listed on the Zimbabwe Stock Exchange, urging its shareholders to disregard the Dendairy deal.
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