Kudzanai Sharara and Michael Tome
Dairibord Holdings Limited has finally decided to offload its loss making subsidiary Dairibord Malawi after efforts to turnaround its fortunes remained elusive for years.
For the past six years, the Malawi unit has been making losses, but management remained hopeful and kept holding on to the asset, saying the Malawi market remained ‘‘attractive to hold and grow the business”.
Growth, however, never came with the subsidiary, once again, recording a loss of $700 000 for the year ended December 2018, a 17 percent increase from the prior year’s loss of $550 000.
Among the challenges faced by the Malawi business include a weak domestic economy and foreign currency shortages. The performance was also constrained by a depressed operating environment characterised by low disposable incomes, a depreciating currency as well as old, antiquated machinery.
“The board resolved to exit Dairibord Malawi following consistent weak performance of the business.”
Chief executive Anthony Mandiwanza, said conclusion of the exit process is anticipated in the second quarter of 2019. The subsidiary, which has an asset base of $2,3 million and liabilities of $2,7 million has therefore been classified as held for sale.
The latest results, in particular its profit margins, should rank as one of the Group’s strongest in a long time. Profit after tax margin of 5 percent is a significant improvement from the 1 percent the group had been accustomed to in the last couple of years.
Earnings per share for the period was up 235 percent to 1,81 RTGS cents and a dividend of 0,70 RTGS cents was declared.
Mandiwanza believes the group has now entered into a period of sustained momentum.
In the 2019 financial year, Mandiwanza and his team is forecasting revenue growth of between 40 and 50 percent and an operating margin of 9 percent from the currently 8 percent.
The Zimbabwe Stock Exchange-listed milk and beverages manufacturer also posted a 119 percent jump in profit to $10 million for the year up to December 2018.
Revenue grew to by $27, 8 million or 28 percent to $126,4 million from $98,7 million. The beverages division contributed 44 percent of the revenue while liquid milk and food segment contributed 31 and 25 percent respectively.
The buoyant performance has been attributed to mixed volumes uptake as beverages uptake recorded a 54 percent growth while liquid milk and food segments recorded growth of 34 and 12 percent respectively.
In a bid to earn and ease foreign exchange challenges the company grew its export earnings by 67 percent to $1,7 million. Limited availability of foreign currency has forced the group to work with tight credit terms with most imports now only possible on a cash basis.
Mandiwanza credited the company’s performance to strong product demand and improved supplier relationships among other reasons.
“The strong performance comes from firm consumer demand, strong brands, milk intake growth, supplier relationships, adequate installed capacity to support growth and robust risk management and Business Information system,” said Mandiwanza.
The buoyant performance comes on the back of a 9 percent growth in liquid milk volume intake to 29 million megalitres and 48 million megalitres on the beverages segment (due to line extensions and market share recovery) which is a 2 percent growth as food segment plunged 11 percent owing mainly to short supply of peanut butter, salad cream and mayonnaise.
Dairiboard also expressed willingness to improve the local dairy industry in order to curb a $7 million worth of milk related product imports. The target is to reduce the import bill.
Meanwhile, Mr Mandiwanza allayed fears of a possible destruction of the Chipinge plant from the just ended Cyclone Idai.
“Chipinge plant is intact, farming
operations have not been disturbed but accessibility is still a challenge,” said Mr Mandiwanza.