LISTED milk products processor, Dairibord Holdings Limited, says it will leverage ongoing capital investment projects and implement aggressive cost containment measures to boost profitability in the next quarter.
In a trading update for the quarter ended March 31, 2024, the group said it expected a difficult operating environment due to the effects of the El Niño phenomenon.
The group expects to spend US$24 million in capital investment in 2024 going into 2025.
“Despite the upcoming quarter being characterised by the customary weather-induced demand, the group is geared to exploit opportunities presented by recently completed and ongoing capital investment projects aimed at optimising efficiencies and boosting capacity,” Dairibord said in the trading update.
“Aggressive cost containment and reduction initiatives will continue and further improve profitability. Headwinds persist in the global operating environment as slow economic growth is anticipated worldwide, a result of various challenges including geopolitical tensions and ongoing supply chain disruptions.”
Dairibord added: “Poor rainfall due to the El Niño phenomenon poses a big threat to the region, the country, and the business.”
The consumer staples concern noted that the group was prepared to deal with water challenges after commissioning water reservoirs at their factory sites.
“While the group expects difficulties in the availability of reliable and affordable quality water and electricity to continue, the negative impact of water woes on operations has been mitigated by water reservoirs commissioned at the factory sites,” the company said.
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During the period under review, the group saw a 38% increase in milk intake to 9,46 million litres owing to the business growth initiative implemented during the quarter.
“The business has been aggressively pursuing raw milk growth initiatives which have started to yield impressive results as milk intake grew by a laudable 38% to 9,46 million litres up from the 6,86 million litres in the prior year’s comparative quarter,” Dairibord said.
“This was ahead of the 21% national growth in milk intake by processors for the same period, as Dairibord continues to be the processor with the largest raw milk intake and widest milk intake base in the country.”
Dairibord said the group’s commitment to its suppliers and farmer support initiatives would ensure a sustainable milk supply for long-term growth.
Overall sales volumes increased by 2% anchored by the milks and foods categories. Liquid milks volumes grew by 14% in the quarter compared to prior year, aided by an increase in raw milk intake.
The foods category recorded a 7% growth from the prior year comparative quarter. However, the beverages category recorded a 3% decline. The proportion of volumes sold in US dollars increased to 85%, up from the 58% recorded in the same period last year.
This was buoyed by a commendable 97% increase in export volumes. In contrast, domestic volumes declined by 3%. Exports accounted for 9% of total sales volume, up from 4% in the prior period.
Despite the operational headwinds in the environment, particularly the adverse impact of the sugar surtax on cost and pricing models, the business still showed resilience by posting growth in sales volume.
Revenue for the quarter was 1% below the comparative quarter last year due to a lower price per litre.
Operating costs decreased by 16% which spawned an improvement in the operating profit margins of the business at 10% compared to 6% in the same period last year.
