Dairibord sneezes due to COVID-19

BY FIDELITY MHLANGA

LISTED foods and beverages producer Dairibord Zimbabwe registered a loss of $419 000 during the first six months of the year from a profit position of $55,39 million as the COVID-19-induced lockdown affected supply chains, market access and buying power.

During the period under review, revenue slowed 15% to $1,23 billion from $1,44 billion.

“The period under review was characterised by continued volatility and significant COVID-19-induced disruptions on business operations resulting in volume decline, increasing costs and modest profitability. While Dairibord operations were designated as essential services and continued operating throughout the COVID-19 lockdown, supply chains, market access and buying power were negatively impacted particularly in the months of April and May,” chairperson Josphat Sachikonye said in the statement accompanying the half year results.

“The all items year-on-year inflation ended June at 737.3%, with foods and non-alcoholic beverages inflation at 1934,3%. Hyperinflation continued to increase costs, erode disposable incomes, reduce aggregate demand, constrain liquidity and put pressure on wage demands.”

Sales volumes for the period, at 27,3 million litres, were 32% lower than in the prior year.

First quarter volumes were 19% down, while second half volumes declined 46% as the impact of the COVID-19-induced restrictions took a toll on operations.

Liquid milks, foods and beverages volumes dropped by 19%, 39% and 41%, respectively, compared to the same period last year.

Raw milk intake for the period was 13 million litres. This was 6% below prior year and was consistent with the decline in national milk production.

“The group remains the biggest milk processor, accounting for 38% of national intake, and continues to be committed to supporting local farmers to grow milk supply so as to reduce dependence on imported milk powders,” Sachikonye said.

“The most significant limiting factor to growth in raw milk production over the period was the high cost of stock feeds, escalating at a rate higher than inflation. To mitigate the erosion of producer viability, Dairibord continued to make frequent producer price adjustments.”

Total assets were $1,66 billion from $1,5 billion for the prior period. Total liabilities were $582,6 billion from $600 million recorded during same period last year
Exports over the period accounted for 8% of the sales volume, up from 5% in the same period last year despite logistics constraints in accessing regional markets due to COVID-19 restrictions.

Sachikonye said despite the operational inefficiencies caused by the challenges, the group continued to focus on cost control, resultantly total operating costs declined 16% from prior period.

The business achieved an operating profit of $107 million compared to $43 million for the same period in 2019. The loss for the year at $0,48 million was due to the monetary loss of $135 million.

“While the first half of the year was extremely challenging as alluded to above, the second half presents better opportunities anchored on a relatively stable exchange rate and improved availability of foreign currency through the auction system and domestic foreign currency sales leading to improved availability of critical raw and packaging materials, a slowdown in inflation, relaxation of COVID-19 induced lockdown, weather induced demand uplift, emphasis on improving digital channels, continued implementation of COVID-19 business risk mitigation strategies across the value chain,” Sachikonye said.

The board resolved to declare an interim dividend of $0,02 per share for the period ended June 30, 2020.

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