DAIRY processor, Dairibord Holdings Limited, overturned its loss-making position to post a profit after tax of US$3,06 million in the half year ended June 30, 2024, owing to a huge reduction in finance costs.
In the comparative 2023 period, Dairibord posted a loss of US$736 361.
During the period under review, Dairibord’s finance costs dropped to US$2, 47 million from US$11,42 million in the comparative period last year.
“The group experienced significant cost increments on account of imported inflation, changes in the tax regime and price distortions arising from exchange rate movements,” Dairibord chairperson Josphat Sachikonye said, in a statement attached to the half year results ended June 30, 2024.
“The imposition of a special surtax on added sugar in beverages at a rate of US$0,001 per gramme effective February 9, coupled with standard rating of maheu and VAT [value-added tax] on milk powders and reclassification of liquid milks from zero rated to exempt, resulted in a substantial increase in the cost of production.”
He said this exerted significant pressure on working capital and exacerbated the financial burden on operations.
“However, cost containment measures employed on manufacturing overheads were successful in reducing cost of sales by 1% from prior year, notwithstanding the volume and revenue growth,” Sachikonye said.
Revenue was recorded at US$54,71 million for the period under review, up from the US$48,47 million recorded over the same timeframe last year.
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The growth was due to a 2% increase in sales volume and strategic pricing adjustments implemented to mitigate margin compression, mainly from the group’s liquid milks and foods categories.
However, for its beverages, this segment contracted by 8%.
Meanwhile, expenses rose about 21% to US$19,83 million during the period under review from the comparative 2023 timeframe.
“The rapid depreciation of the local currency prior to the introduction of the ZiG [Zimbabwean Gold] resulted in significant net foreign exchange losses of US$3,3 million [2023: US$3,84 million] arising from foreign currency denominated obligations,” Sachikonye said.
“Included in the finance costs figure of US$2,48 million are foreign exchange losses on foreign currency denominated loans and borrowings amounting to US$1,46 million.
“However, amid volatile and challenging economic headwinds, the business managed to achieve a profit for the period of US$3,06 million, a notable recovery from the US$0,74 million loss incurred in the comparative period last year.”
Total assets were mostly stagnant at US$50,32 million compared to the December 2023 level.
Sachikonye said cost reduction had emerged as a paramount imperative, given the persisting constraints within the operating environment.
“Concentrated effort will be directed towards minimising expenditures by targeting the major cost drivers,” Sachikonye said.
He said the group would prioritise the expansion of export activities with a focus on bolstering foreign currency inflows, optimising production capacity and elevating its brands regionally.
In terms of liquidity, the firm had US$1,63 to every dollar of short-term debt showing it was highly liquid to carry out its plans.
