DAIRIBORD Holdings Limited (DHL) narrowed its losses to $846 588 during the half year ended June 2017 from $1,8 million reported in the comparable period last year after aligning its overhead costs to revenue.
BY FIDELITY MHLANGA
DHL chairperson, Leonard Tsumba said the diary manufacturing entity reduced its overheads by 8% during the period.
“Initiatives to align overhead costs to revenue are beginning to bear fruit. Total overheads for the period, at $18,7 million, were 8% below prior period with labour costs declining 14%. The restructuring of the group has progressed in line with plan and manning levels at the end of June were 10% below December levels,” he said in a statement accompanying the group’s results.
Resultantly, earnings before interest taxation deduction and amortisation improved to $2,9 million in 2017 from $347 000 in 2016.
Tsumba said milk consumption reduced during the period under review due to fresh competition, as well as low production at farm level.
“Raw milk intake was 20% below the previous year’s 12 053 litres, largely due to new competitors coupled with a notable decline in productivity at farm level, caused by the incessant rains in the first quarter,” he said.
Tsumba said the firm was prioritising recovering lost milk consumption through attracting new farmers, increasing productivity on existing farms and growing the herd.
Volumes sold across all categories were above the previous period benefiting from investments made in 2016, line extensions, firm demand and Statutory Instrument 64.
“Volumes grew by 4% to 37 398 million litres with liquid milks, foods and beverages increasing by 2%, 10% and 3%, respectively. The first quarter was constrained by bad weather and disruption of business activities due to system changeover challenges during consolidation of operations. Performance improved in the second quarter, but was impacted by shortages of inputs, mainly raw milk and imported materials,” he said.
In terms of key volume drivers, Tsumba said Pfuko grew 31% driven by new flavours that were launched in May 2016. UHT milks grew by 24% on account of the cartonised lines.
Yoghurts, salad cream, tomato sauce and peanut butter recorded strong demand, Tsumba said.
“Average selling price per litre firmed to $1,15 from $1,14, a 1% increase on the first half of 2016. The increase was on account of the change in product mix driven by growth in the foods category, which have a higher selling price per litre. Growth in volumes and price per litre culminated in a 5% growth in revenue to $44,6 million.”
He said performance of the group’s subsidiary in Malawi remained subdued due to working capital constraints. The subsidiary contributed 3% to the group revenue, with an operating loss of $243 993.
Tsumba said the group would, in the outlook, focus to consolidate the benefits of the initiatives started in the first half of the year that include improving product supply for key volume drivers to meet market demand, refinement of process efficiencies along the value chain taking advantage of the consolidated structure.