…FX obligations adequately covered
By ETimes
Dairibord, the country’s largest milk processor, says the majority of its liabilities were fully covered in the first six months of 2022.
Local companies are facing an increasing difficulty in keeping up with payments on their dollar debt.
Some are taking defensive positions, significantly reducing their expansion plans and reviewing their cost structures.
“Foreign currency obligations were at US$4.3 million, including a long-term loan of US$0.66 million,” said the company’s chairperson, Josphat Sachikonye, in a statement accompanying the results on Monday.
“Most of the obligations were adequately covered by foreign currency assets and expected disbursements of outstanding allotments from the auction market.”
Analysts accused the apex bank of basically allocating more than what they were getting, resulting in the creation of a backlog.
Sales volumes for the company rose 11% in the period under review.
“Demand for our products remained firm across all categories,” he said.
A total of 40% of the sales volume was made in foreign currency, with 32% going to the domestic market and 8% to export markets.
Foods made up 10% of the total volume, beverages 62%, and liquid milk 28%.
“This affirms the growing contribution of non-milk product categories and product portfolio diversification, in line with our “more than just milk” strategy.”
The Dairy Services Department of the Ministry of Agriculture reports that Zimbabwe’s H1 2022 milk consumption by processors increased 17% to 38.96 million liters from 33.42 million liters in the preceding quarter. Dairibord made use of 12.29 million liters, or 32% of the total amount taken in by processors. Although at decreased levels, the group continues to hold the title of processor with the largest milk intake.
Sachikonye said the price of stock feed continued to rise in line with food inflation pressure.
“The group has elevated initiatives for aggressive milk supply development for low cost and high-volume milk production,” he said. “
“The long-term benefits will be competitive local milk prices, import substitution of milk powders, and opportunities for export growth.”
Inflation-adjusted revenue grew 40% to ZW$17.12 billion, helped by growth in volumes and moderate price adjustments to preserve margins.
Cost of sales grew by 37% in inflation-adjusted terms. Overheads grew by 30%.
“The group experienced significant cost increases on account of imported inflation and price volatility arising from exchange rate movements,” he said.
Dairibord’s operating profit increased 140% to ZW$1.26 billion compared to ZW$524 million [historical: ZW$292 million] in prior year. The operating profit margin for the period was 7% up from 4% in the prior period.
The ZW$1.2 billion in borrowings was used to finance lengthy working capital cycles as well as capital investments to boost manufacturing output. The group reported a profit before tax of ZW$1.1 billion once finance costs, foreign exchange losses, and other incomes were taken into account.
According to him, the considerable investments in inventories, prepayments to suppliers, and delays in customer settlement caused working capital Cash flows from operating operations to be muted. With a current ratio of 1.6, the company was comparatively liquid.
The group’s primary focus is on cost containment and volume growth to close the gap between supply and demand in the majority of product categories.
“The growth will be largely driven by the beverages and foods, benefitting from the commissioning of plant and equipment for additional processing capacity in the third quarter of the year,” he said in his outlook.
“The Group will also focus on realignment of its route to market to increase cash receipts, local US dollar sales and exports.”
It resolved to declare a dividend without disclosing the figure – Harare