ZIMBABWE – Dairibord Zimbabwe Ltd (DZL), Zimbabwe’s largest milk processor reported a 40% decline in sales volume for the third quarter to September 2019.
The drop-in sales volumes was attributed to constraints of availability of input, continual deterioration of macro-economic fundamentals including the floating of the exchange rate from the previous 1:1 fixed rate and the introduction of a local currency.
“These in turn led to low production output, increased utility costs and depressed consumer disposable incomes,” according to the performance update issued by company secretary Mercy Ndoro.
“Foreign currency supply shortages persisted, negatively impacting ability to meet demand. Depreciation of the local currency resulted in increased costs of materials and other key inputs,” Ms Ndoro said.
“Production output and operating costs were adversely impacted by the worsening erratic supply of water and electricity.”
Ms Ndoro said aggregate demand was reduced due to the erosion of salaries and wages with month on month inflation during the quarter averaging 19 percent.
In the milk business, liquid milks declined by 22 percent for the quarter and 1 percent for the nine months to September 2019 caused by constrained supply of milk powders which were however mitigated by growth in raw milk intake.
Raw milk intake reportedly increased by 2 percent in the quarter and 14 percent to September 2019. Interestingly, cumulative growth was higher than the national growth of 9 percent.
Growth in raw milk intake was propelled by the group’s initiatives to “grow and sustain local milk production,” initiatives that lessened dairy farmers’ burden in accessing inputs, reports the Herald.
Foods category sales volumes were 58 percent below the 2018 quarter and 38 percent down on accumulative basis. This was attributable to “a shift in consumer spending patterns.”
Constrained supply of imported and local materials led to a decline in beverages’ volumes by 47 percent in the period under review and by 17 percent on a cumulative basis.
Cumulative volumes for all categories to September 2019 declined by 14 percent.
Going forward, the group aims to invest in inventories, pursue cost reduction and containment strategies as well as to improve in operational efficiencies to sustain margins. Inflation is anticipated to slow down while exchange rates stabilise.