Dairibord capital expected to fall

Dairibord.gif

Dairibord Holdings Zimbabwe is the only company that publish its business model in its annual report to its stakeholders Zimbabwe.

MILK and dairy products producer Dairibord Zimbabwe’s working capital position is projected to deteriorate with margins softening from 2019 as a result of limited access to foreign currency on the interbank market with the company unable to pass on the cost of goods to the consumer without negatively impacting volumes.

Melody Chikono

Most companies have been struggling with their working capital positions as a result of the country’s economic decline with limited access to foreign currency against a deteriorating currency and runaway inflation.

While the group naturally performs better in the second half given the impact of summer on natural demand in beverages and certain food-lines, IH Securities point out there is likely to be sustained pressure on inputs, volumes and potentially margins as costs re-align.

Earnings before interest, tax, depreciation and amortisation (Ebitda) margins are also seen coming off to 10% in full-year 2019 from 11,9% in full-year 2018 as the cost of raw materials and operating costs are expected to increase.

Dairibord recorded an overall 3% volume growth to 40,3 million litres for the first half of 2019, constrained by input supplies.

Encouragingly, the intake of raw milk increased 22% above the industry average of 14% as the group’s efforts to increase domestic supply of milk and reduction of reliance on imported milk powder continued to yield results.

“We anticipate the working capital position to deteriorate as the supply and access to the foreign currency on the interbank remains subdued despite reports of improvement in liquidity. With the disposal of Dairibord Malawi, we anticipate the overall profitability of the Group to increase as losses from discontinued operations will cease to weigh down the bottom line,” noted IH. — Staff Writer.

Leave a Reply

Your email address will not be published. Required fields are marked *

Top