Dairibord plans $10m capex

HARARE - Milk processor Dairibord Holdings (Dairibord) plans to spend $10 million in capital expenditure this year, targeted at consolidating its market share.

Its chief executive Anthony Mandiwanza said the funds will be spent on plants upgrade and procurement of new equipment to boost capacity and efficiencies.

“We are also looking at investing in marketing to increase brand visibility and launch new innovative products and line extension,” he told analysts.

This comes as the Zimbabwe Stock Exchange-listed concern— formerly enjoying monopolistic advantages — is facing stiff competition from other players such as Delta Corporation, Dendairy and Gushungo Holdings, among others.

Mandiwanza noted that the group will also invest in research on cost effective ingredients without compromising quality and further upgrade its information technology systems.

“The company will this year buy an additional 200 heifers bringing the total to 290 in 2014 resulting in incremental raw milk volumes of 1,6 million litres per annum,” he added.

Dairibord, with other operations in Malawi, has invested $21,6 million between 2009 and 2013 in equipment.

Meanwhile, the group has recorded a $1,7 million loss in the year to December 2013, plunging from a $7,1 million after tax profit realised in prior year as volumes declined under pressure from cheaper imports.

During the period under review, revenue went down six percent to $100 million.

The company reported $4,6 million in impairments for plant, equipment and inventories.

Mandiwanza said total group sales volumes recorded an eight percent decline compared to the previous year.

Beverages and foods recorded a decline of 19 percent and one percent respectively while liquid milk products grew marginally by two percent.

“The decline in sales volumes for beverages was due to business disruptions following a strategic decision to re-organise and rationalise processing.

This largely resulted in supply constraints of some product lines.

Although the sales volumes of Cascade dropped as a result of unit size reduction the value per litre was enhanced,” he said.

Net cash generated from operations increased to $5,9 million from $5,3 million.

“At the end of the year, the group secured a $6 million loan facility from PTA Bank with a tenure of five years at an “all in cost” of 10,3 percent,” Mandiwanza said.

Dairibord produces 40 percent of Zimbabwe’s annual raw milk, which at 54,7 million litres last year, was 20 percent of the all-time peak of 256 million litres achieved in 1991.

Mandiwanza said the group generated $1 million in revenue through a toll arrangement for its Chimombe fresh milk brand.

The group incurred $800 000 in retrenchments costs after shutting three local factories, shedding 240 workers in the process.

“We want to further reduce the factories to three and have a staff complement of 1 495 by year end,” Mandiwanza said.

 

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