The Sunday News
Oliver Kazunga, Senior Business Reporter
DAIRIBORD Holdings Limited recorded a six percent drop in raw milk intake to 13 million litres in the half year period ended 30 June 2020 as national milk output also decreased.
The trading environment during the period under review was crippled by the Covid-19 impact on business operations resulting in volume decline, increasing costs and modest profitability. Supply chains, market access and buying power were negatively impacted particularly in the months of April and May.
This is despite the fact that Dairibord was designated as an essential service and continued operating throughout the Covid-19 lockdown.
“Raw milk intake for the period was 13 million litres. This was six percent below prior year and was consistent with the decline in national milk production,” said the group in a statement accompanying its financial results for the period.
The group, however, remains the biggest milk processor accounting for 38 percent of national intake and says it continues to be committed to supporting local farmers to grow milk supply so as to reduce dependence on imported milk powders.
According to Dairibord, the most significant limiting factor to growth in raw milk production over the period was the high cost of stock feeds, escalating at a rate higher than inflation.
To mitigate the erosion of producer viability, Dairibord continued to make frequent producer price adjustments. Sales volumes for the period at 27,3 million litres, were 32 percent below prior year.
“First quarter volumes were 19 percent down, while second quarter volumes declined by 46 percent as the impact of the Covid-19 induced restrictions took a toll on operations,” said the company.
In addition, liquid milks, foods and beverages volumes dropped by 19 percent, 39 percent and 41 percent respectively compared to the same period last year. Revenue for the period was $1,2 billion, 15 percent below 2019.
However, in historical terms revenue grew by 537 percent. Dairibord said the focus on generation of foreign currency revenues during the period continued and thus exports over the period accounted for eight percent of the sales volume up from five percent in the same period last year despite logistics constraints in accessing regional markets due to Covid-19 restrictions.
Despite the operational inefficiencies caused by the dis-economies of scale, the group continued to focus on cost control, as a result total operating costs declined 16 percent from prior period.
“The business achieved an operating profit of $107 million compared to $43 million for the same period in 2019,” it said.
“The loss for the year at $0,48 million was due to the monetary loss of $135 million. An operating profit margin of nine percent was attained up from three percent in prior year.”
Meanwhile, Dairibord said as per the standing cautionary statement published on July 22, shareholders were advised that negotiations for a merger and acquisition transaction were ongoing.
If successfully concluded, the negotiations will have a material effect on the price of the company’s shares, thus shareholders are advised to continue exercising caution when dealing in Dairibord shares until further notice.
@okazunga
