Dairibord Holdings Limited chief executive officer Mercy Ndoro says the rise in the cost of doing business is posing a challenge for the diary processor. In the firm’s last trading update for the period ended September 30, 2024, Dairibord complained about exchange rate volatility, saying it had triggered severe disruptions in trading activities, impacting pricing models and giving rise to exchange losses for the business.
Dairibord also noted that the liquidity crunch also hampered its business.
The firm said persistent supply chain disruptions and intermittent access to critical utilities such as water and electricity resulted in increased operational costs and compromised production continuity.
This comes despite the firm having overturned its loss-making position to post a profit after tax of US$3,06 million in its half year fiscal period ended June 30, 2024, owing to a 78,31% reduction in finance costs.
“The cost of doing business in Zimbabwe is a significant challenge for many companies and Dairibord is no exception. The impact of new taxes and legislation have also presented severe business viability challenges,” Ndoro told NewsDay Business.
“The promulgation of the special surtax on sugar content in beverages, the re-designation of the VAT [value added tax] status of milk from zero-rated to exempt and the increase in the Intermediated Money Transfer Tax and high cost of compliance have resulted in notable cost pressures and cash flow challenges.”
Taxation has also emerged as a rising expense for firms.
“Exchange rate instability that was prevailing over time resulted in pricing distortions in the market, which increased the cost of inputs for Dairibord,” Ndoro said.
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“The lack of cross-border fungibility of the ZiG also resulted in foreign currency shortages as importers such as Dairibord faced challenges in sourcing foreign currency to import critical raw and packaging materials.”
She said when the devaluation of the ZiG occurred last September, the group incurred foreign exchange losses on ZiG receivables.
“However, as a company, we are employing various strategies to mitigate the impact of these cost pressures, including cost reduction through streamlining operations and improving efficiencies and exploring new markets to improve our revenue base,” Ndoro said.
In the outlook, the company’s growth strategy would be anchored on volume growth and cost reduction, she said.
This will be achieved through investments to support key brands, continued enhancement of its toll manufacturing arrangements in South Africa and regional market development by expanding distributors and diversifying the product portfolio.
Ndoro said there would be continuous route to market optimisation as well as cost containment and cost reduction initiatives.
Such cost reductions saw the group’s revenue for the quarter ended September 30, 2024, outpacing the comparative period by 37% and cumulative revenue grew by 22% to US$91,6 million.
“...several new projects are under development, primarily focused on capacity enhancement and the replacement of aging equipment,” she said.
“Furthermore, the solar project in Chipinge is progressing as planned. This initiative will mitigate downtime caused by frequent power outages and reduce our dependence on diesel-powered generators for backup power.”
