By ETimes
Financial Performance Highlights
- ZSE listed Dairibord Holdings reported a loss of ZWL$4.6 billion for its half year ended 30 June 2023. The group attributed the weak performance to the sharp exchange depreciation which led to heavy exchange losses and increased finance costs.
- Operating profits before interest increased by 237% in inflation adjusted terms to ZWL$61 billion and EBITDA rose by 206% to ZWL$68.9 billion.
- Gross profit increased by 20% to ZWL$58.3 billion as cost of sales increased by 68% to ZWL$248 billion. The group reported significant cost increases due to imported inflation and price distortions, as well as rising material costs and utilities.
- The groups revenue increased by 56% to ZWL$306 billion, with raw milk intake increasing by 16% to 14,266 million litres, and total sales volumes increasing by 9% to 51,241 million litres. Liquid milk sales volumes grew by 6% and beverages recorded 16% volume growth. Foods volumes declined by 23% due to inconsistent input supplies and depressed demand for ice-creams. According to the group, 64% of volumes sold were in foreign currency during the entire period with the proportion peaking at 92% in July 2023.
- Net cash flows from operations were at a deficit of ZWL$3.6 billion, which widened to ZWL$35 billion after the groups financing and investment activities. The outcome was attributed to to prepayments to suppliers and delayed settlement from customers. The group met the working capital shortfalls using short-term borrowings.
- Total assets increased by 4% to ZWL$272 billion, with cash holdings of ZWL$1.8 billion, inventories of ZWL$62 billion and prepayments and receivables of ZWL$46 billion.
- Total liabilities declined by 4% to ZWL$122 billion, with payables of ZWL$76 billion and total borrowings of ZWL$26 billion.
- Looking ahead, the group expects foreign currency sales volumes to continue increasing, and will focus on minimizing exchange risk and containing costs. The group will also look to drive volume growth through new products and product line expansion, as well as expansion into regional markets.
- The board opted against declaring a dividend for the period.
Analysis and Commentary
Its a set of financial results that raises some immediate concerns for the group. It is evident from the decline in the profit margins that the group was significantly affected by escalating operating and manufacturing costs. The groups gross profit margin worsened to 19% from 25%, and the operating expense to revenue ratio worsen to 34% from 20%. The other issue is the noticeably low levels of internal resources relative to the group’s growth oriented strategic objectives. The rising contribution of forex sales is a positive as the group looks to minimize its exchange related losses and create some internal capacity. But, the decreased ZWL liquidity makes it likely that Dairibord’s volume growth will remain weak in the short-term. So, the outlook for the second half is subdued, expecting increased foreign currency sales and relative exchange stability to narrow the losses by easing the exchange losses and stabilizing operating costs. However, the low cash flow generation is likely to keep the group reliant on expensive debt for its working capital needs – which will keep weighing profitability.
On the ZSE, since the start of 2023, the OKZim share has gained 1096% in nominal terms and 46% in implied USD terms. The share is currently trading at a price to book ratio of 0.17x.
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