HARARE - Zimbabwe's largest milk processor Dairibord Holdings Limited (Dairibord) says it will shut down its Bulawayo and Mutare plants as part of strategies to contain costs.

The listed group said it will also cut its staff compliment by 12 percent to 1 505.

Anthony Mandiwanza, Dairibord’s chief executive, said they will start implementing the measures by end of March.

He said the streamlining exercise was prudent considering the current depressed business.

Zimbabwe’s milk production has declined — following the land reform programme in 1999 — from a peak of 257 million litres per year to the current 54 million litres.

“The installed infrastructure especially of the milk processing plants is not aligned to the current reduced processing volumes, and hence the need to rationalise operations,” Mandiwanza said.

He said the rationalisation is expected to be complete within the first half of 2013.

“This will not affect our production levels as we will consolidate their operations in our Harare and Chitungwiza plants,” said Mandiwanza adding that the exercise will ensure sustainability of operations.

He said the group’s Bulawayo plant used to process 40 percent of the company’s production but, now relied on raw milk supplies being transported from Harare, which was uneconomical.

“We are looking at more than $1 million per annum which we will get out of the rationalisation of Bulawayo and Mutare plants.

“That will open our margins as we move forward. We are now at the tail end of implementing this significant initiative and it will align our business structure and create a leaner and more efficient organisation,” said Mandiwanza.

He said the group maintain its sales and marketing teams in the cities to uphold market presence.

Meanwhile, Dairibord recorded a $9,8 million operating profit in the year to December 2012, down from $10,8 million registered in 2011, while profit remained unchanged at $7,1 million.

Operating profit margin shed off two percentage points from 11 percent to nine percent.

Mandiwanza said the group continued to generate positive operating cash flows with net cash flows generated from operations for the year amounting to $5,3 million. Borrowings increased by $1,3 million to $7 million, in support of the 2012 capital expenditure of $6,5 million in plant equipment.

Although profit contribution from the group’s Malawi subsidiary remained positive, the unit’s operating profit went down 41 percent to $484 000 due to currency devaluation.

The group’s revenue from continuing period increased by 11 percent to $107 million whilst revenue from foods increased by 22 percent, beverages by 11 percent and liquid milks by two percent with no consumer price adjustments effected during the year to maintain market competitiveness. - Kudzai Chawafambira