Martin Kadzere : Senior Business Reporter
LISTED food and beverages company, Dairibord Holdings expects a 10 percent increase in volumes this year, mainly benefiting from expansions and new flavours and value offerings. The company plans to spend $6 million on Chimombe milk carton investment and expansion of maheu plant in Chitungwiza, chief executive Mr Anthony Madiwanza said.Growing opportunities in the informal sector and investment in brand building will also spur volume growth, but revenue is expected to remain flat due to a projected price reduction.
Dairibord recorded a 19 percent growth in sales volumes in the full year to December 31 to 84 million litres, driven by beverages portfolio and the group said it will focus on “defending volumes”.
“Volumes will be up 10 percent but if you factor in the impact of the 10 percent price reduction, our revenue will remain flat,” said Mr Mandiwanza.
Weak consumer demand mainly resulting from liquidity constraints continue to put pressure on prices. Being a consumer facing stock, the stagnation in revenue, albeit projected volume growth, depict a scenario much bigger than the company itself.
It is a case of an economy in depression pulled down by among other things, weak consumer demand, pricing pressures from imports, weak regional currencies and subdued capacity.
Last year, the company recorded a 4 percent increase in revenue to $103 million while sales volumes rose 19 percent compared to the previous comparable period. The beverages portfolio comprising Pfuko maheu, Cascade and Aqualite mineral water contributed 45 percent to overall volumes. Liquid milks grew by 1 while foods fell 4 percent.
“The change in consumer spending patterns, from luxury products to basics, negatively impacted the performance of foods which comprises mainly ice creams and yoghurts.”
Dairibord said the mis-match between revenue growth and volume performance was due to a change in the product mix and reduction in consumer prices.
While volumes and revenue grew by 19 percent and 4 percent respectively, total operating costs rose by 1 percent, benefiting from business re-alignment initiatives put in place early last year.
As such, operating profit for the period improved to nearly $4 million from $1,35 million a year earlier. The operating profit margin was 4 percent up from 1 percent in 2014.
Dairibord Malawi recorded an operating loss of $11 000 an improvement from an operating loss of $383 000 a year earlier. It is expected to positively contributed to the group’s earnings this year.
The board will however, continue reviewing its position on the investment, taking into consideration the performance of the business trends and macro-economic environment.
Predicting “tough times ahead” Mr Mandiwanza said the group would focus on curtailing procurement costs of materials and services while further enhancing production and distribution efficiencies to minimise the impact of negative economic environment.
The group will also focus on import substitution through product innovation.
Mr Mandiwanza said the company will put on hold its heifer procurement programme due to droughts. Last year, the programme contributed 8 percent of raw milk.
The company had targeted to procure 500 heifers last year but imported 330 due to challenges in obtaining permits from the Government.