Dairiboard Zimbabwe Holdings Limited (DZHL), the country’s biggest producer of milk and dairy products has benefited from Statutory Instrument 64 of 2016 with the firm’s products like mayonnaise and tomato source registering growth due to banning of imports that had flooded the local market.
Speaking to 263Chat on the sidelines of the company’s end of year financial results, DZHL Group Chief Executive Officer Anthony Mandiwanza said his company received a new lease of life after government introduced the measure which was meant to promote the growth of local industries.
He said DZHL has seen a steady growth in both food and dairy products.
“SI 64 has been of tremendous value to us especially in the area of Mahewu and peanut butter. We have also seen growth in products such as Mayonnaise, Tomato Sauce which were all being imported in the country.
“Ever since the introduction of the SI 64, we are now able to produce these products and sell locally and we now have the capacity to produce more. So this has been a huge benefit,” said Mandiwanza.
He added that there has been an increase in capacity utilisation for the processing plants for peanut butter, mayonnaise and tomato source.
“Because of SI64 and the investment we have made on UHT (Ultra-high temperature) cartonised milk it means we were importing ourselves into the country,” he said.
Mandiwanza further stated that DZHL has also been benefiting from the Reserve Bank of Zimbabwe and Ministry of Industry’s prioritised foreign currency support scheme. He added that most of DZHL’s products are on the priority list to support industrial growth.
He however, announced that the company a net loss of $5,4 million for the 2016 financial year, from a $2,3 million profit recorded in the preceding year, and an operating loss of $3,99 million from a $3,97 million operating profit previously and the stunned audience wanted answers.
“We know that our performance last year was very bad due to a number of issues and we know you have a negative impression about it, but we promise to improve this year going forward,” he added.
When an analyst suggested that in the current environment, the company should focus more on managing costs of the existing operations rather than continue with expansion initiatives which were not bearing economies of scale, Mandiwanza retorted that the company will not held back from expanding because the results were not immediate.
“We are not going to shrink ourselves to get outside of the pit but we do believe that we should grow out of it,” he said.
Dairiboard should be one of the companies to benefit from the import restrictions but dairy products continue to be smuggled into the market so foreign competition remains a challenge and will continue to put pressure on the top line.
Additionally, the company is facing the threat of new entrants in the market with relatively cheaper products.
In the period, revenue declined by 10 percent from $103,4 million recorded in the preceding year to $93,4 million chiefly as a result of price reductions to address affordability and competitiveness.
The company revised prices downwards in the period resulting in a significant 9 percent decline in consolidated average price from $1,23 per litre in the previous year to $1,13 per litre.
Sales volume declined by one percent to 83 million units as a result of lost production although this was partially offset by a surge in raw milk intake which was up 18 percent to 31 million litres.