LIMITED supplies and a relatively high cost of raw milk has forced Zimbabwe Stock Exchange-listed manufacturing company Dairibord Holdings into toll manufacturing, as problems confronting the economy continue to make local companies uncompetitive.
Report by Bernard Mpofu
Group chief executive officer Anthony Mandiwanza last week told an analyst briefing that the decision to produce cartonised Chimombe milk (through toll arrangements), was part of the group’s plans to contain overhead costs.
DH profit after tax for the year ending December 31 2012, remained flat, year-on-year, at $7 million.
“The key focus of attention for the business going forward is on cost realignment, which entails rationalisations of our factory operations. Where we were duplicating production, we will centralise that,” Mandiwanza said.
“The benefit that arises out of that is enormous. That would give us an enormous benefit through rationalisation. We also looked at the issue of milk production in the geographical area where our factories are located.”
The misalignment between overheads and volumes of activity, Mandiwanza said, had impacted on the operating costs for the business.
Currently a litre of milk costs 62 cents locally compared to an average 40 cents in South Africa. This has resulted in local companies struggling to compete with imported milk products.
Mandiwanza said high utilities, labour costs and a smaller herd of dairy cows had resulted in the limited supply of milk as well as the high cost of production.