Dairibord Holdings Limited (DZL.zw) HY2019 Interim Report

We have extracted a Chairman’s Statement from the 2019 half year interim report for Dairibord Holdings Limited (DZL.zw), listed on the Zimbabwe Stock Exchange:


I am pleased to report the Group’s results for the half year ended 30 June 2019. The Group’s performance, particularly growth in volume sold and raw milk intake, reflect the positive impact of business strategies deployed under an increasingly difficult trading environment.


The period under review was characterised by several government policy changes that redefined the fundamentals in the business environment. Specific policy changes included the floating of the exchange rate from the previous 1:1 fixed rate; the introduction of a local currency, the ending of the multicurrency system and the increase in the Reserve Bank overnight accommodation rate from 15% to 50%.

These policy changes, though welcomed by most industry players, are yet to positively impact business fundamentals. Foreign currency supply remains a major challenge impacting both inflation and availability of inputs. In addition to the aforementioned developments, fuel, electricity and water supply worsened as the year progressed, thus further negatively impacting the already fragile economy. The all items year on year inflation ended the month of June at 176%, with the foods and non-alcoholic beverages inflation at 252%. Capacity utilisation in the manufacturing sector, as reported by the Ministry of Industry and Commerce, significantly decreased to an estimated 34% from 48% achieved in 2018.


Reporting currency

The changes in the currency regime mentioned above resulted in a change in functional currency from US Dollars for the prior year to Zimbabwe Dollars (ZWL) for the current year. The financial statements for 2019 are therefore presented in ZWL while comparative numbers for 2018 were converted to ZWL at a rate of 1:1 in compliance with SI33 of 2019.

Raw Milk Intake

Raw milk intake continues to grow in response to the Group’s efforts to close the demand-supply gap for milk products in the country as well as reducing dependence on imported milk powders. For the period under review, raw milk intake grew 22% ahead of the national average growth of 14%. The business will continue to invest in supporting viability of the milk supply chain which is increasingly becoming vulnerable under the prevailing macro-economic conditions.

Volumes and Revenue

The business achieved a volume growth of 3% to 40.3 million litres. The growth was constrained by worsening supply of inputs. By portfolio, Liquid Milks and Beverages volumes grew by 13% and 3% respectively while Foods volumes declined by 26% compared to same period last year.

Revenue for the period was ZWL118.1 million, a growth of 139% above 2018. This growth was on account of volume growth and gradual price adjustments to align with market conditions and cost push pressures. Price adjustments were however below the depreciation in exchange rates in order to balance viability with affordability. The ability to pass on to the consumer the full impact of cost increases was constrained by declining disposable incomes. In an effort to generate foreign currency for imports of raw and packaging materials, sales in foreign currency grew by 244% to US$2.1 million. Export growth in the regional market is of strategic importance for business survival and growth.


While revenue increased by 139%, total operating costs increased by 123%. Resultantly, an operating profit of ZWL12.2 million was recorded compared to ZWL0.9 million achieved in the prior period. Following the liberalisation of exchange rates in February 2019, and the translation of foreign obligations to the Zimbabwe Dollar (ZWL), the business incurred foreign exchange losses of ZWL5.9 million for the period ended 30 June 2019. After accounting for the foreign exchange losses and an interest bill of ZWL0.3 million, the company posted a profit before tax of ZWL6.1 million compared to ZWL0.7 million achieved in the prior period

Working capital

Foreign currency denominated liabilities closed the period at US$1.85 million from US$3.96 million at 31 December 2018, of which $0.6 million is long term and the balance being short term obligations. Interest bearing borrowings increased to ZWL17.3 million from ZWL3.7 million as at 31 December 2018, with ZWL6.8 million arising from foreign exchange losses on the foreign loans. In view of the rising interest rates and constrained liquidity, the company will focus attention on strategic borrowings going forward.


Investment in plant and equipment was curbed at ZWL2.4 million compared to ZWL0.5 million in prior year. The investment during the period was constrained by access to foreign currency thereby directing limited resources to critical items only.


The disposal process for Dairibord Malawi is at an advanced stage. An investor has been secured and parties are in the process of finalising the deliverables in line with agreed terms. The disposal process will be concluded by the end of August 2019.


The company remains committed to integrating the Sustainability Agenda with the entire strategy of the business. The company is currently reviewing its Sustainability Reporting framework to provide both internal and external stakeholders with more information necessary for assessing the impact of the company’s operations on the society, environment and the economy. In the same process, the business also aims to improve efficiencies and build the company’s non-financial capitals necessary for value creation.


With respect to the future, the environment is envisaged to remain fragile and uncertain making it difficult for businesses to implement their growth plans. The supply of electricity, water and foreign currency is expected to remain constrained. Under such circumstances, the company will focus on the survival and hold strategy. Critical for survival in the second half of the year are the following issues:

  • Supporting viability and growth of the milk supply chain as an import substitution and export growth strategy
  • Cost reduction and efficiency improvement initiatives to mitigate inflationary pressures
  • Reducing foreign currency liabilities and limiting borrowings to support critical supply and demand requirements
  • Optimising the cash operating cycle through reviewing credit terms to align with emerging trends
  • Developing export initiatives in the region
  • Continue to invest in robust risk management and compliance procedures

Given the aforesaid challenges in the operating environment, sales volumes for the second half are expected to be lower than what was achieved in the first half of the year. However, the board is confident that the company has a sound business model capable of preserving shareholder value and viability for the remainder of the year.


In light of the changes in the environment and the need to support working capital requirements, the board has resolved that no dividend be declared for the six months ended 30 June 2019.


Mr David Hasluck and Mr Cron von Seidel retired at the AGM held on 31 May 2019 having joined the board in 2015 and 2016 respectively. David was Chairman of the Finance and Audit committee and a member of the Milk Supply Development and Remuneration Committees. Cron von Seidel was a member of the Investments committee. I would like to thank and wish both gentlemen all the best in the future. The Board approved the appointment of Mr Ketan K Naik as director of the company with effect from 21 August 2019. Ketan holds a BSc. (Hons) in Management Sciences from Warwick Business School and MSc. Real Estate Investment from CASS Business School. He is a director of several private companies and also a member of the Harare Chapter of the Young Presidents Organisation.


On behalf of the board, I would like to extend my appreciation to our customers, suppliers, employees and other stakeholders for their continued support to the business under the prevailing difficult circumstances.

J. Sachikonye