HARARE – Slowing demand due to a tight liquidity squeeze in the economy saw Dairibord Zimbabwe report a 7% sales volume decline in the third quarter to September.
Performance was affected by the changes in the operating environment that reduced sales volumes in July and August. The operating environment for the quarter was mainly characterised by tight monetary policies in response to extreme inflationary challenges of the first half of the year. This resulted in liquidity challenges across the value chain, constraining aggregate demand and growth of the business.
The volumes recovered in September, exiting the month at 6% above prior year.
As a result, the cumulative sales volumes for the nine months were 5% above prior period with Foods and Beverages growing 21% and 12% respectively. Liquid Milk sales volumes declined 13% on account of raw milk supply challenges.
Export sales volumes for the quarter grew 118% compared to the same period last year and 101% for the cumulative period. Exports accounted for 11% of total sales in the quarter (5% in Q3 of 2021) and 9% for the cumulative period (4% in 2021). “The group’s focus on export market development was evident. Regional markets responded positively in the quarter.”
Revenue for the quarter in inflation adjusted terms was 39% above Q3 2021 (421% in historical terms). Year to date inflation adjusted revenue was 39% above same period last year (287% up in historical terms). While revenue for the cumulative period grew by 39%, operating costs grew by 38% on account of cost containment measures and improved operational efficiencies. Resultantly, the operating profit margin improved to 7% from 6% in the prior period (10% from 8% in historical terms).
Raw milk utilised for the period at 19.8m litres, was 3% lower than prior period and accounted for 32.9% of the intake received by processors. Dairibord remains the processor with the highest raw milk intake and widest milk intake base in the country.
Dairibord noted that it has invested in processing capacity in order to close the current supply gap and capitalize on opportunities created by national economic growth, which is being driven by agriculture, mining, and beneficiation projects in oil, gas, lithium, platinum, gold, chrome, and steel.
The group said total borrowings were at $2.21 billion, including foreign currency loans of US$2.1 million. “Management restructured borrowings to minimise the negative impact of the prevailing interest rates.” In US$ terms, the loans were at US$3.6 million (at a Willing Buyer Willing Seller exchange rate of 647). The business remains fairly liquid with a current ratio of 1.3 times.