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Dairibord to start toll production in SA
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Dairibord Holdings is set to expand its operations in the region to drive export growth, with South Africa as the immediate destination for a planned toll manufacturing project. The initiative is expected to diversify revenue streams and boost foreign currency earnings.
The dairy processor, which already supplies products to key regional markets such as Botswana, South Africa, Malawi, and Mozambique, believes that toll manufacturing will solidify its footprint in South Africa and strengthen its regional presence.
Although Dairibord Zimbabwe officially divested from its Malawian operations in 2019, it continues to export to that market, maintaining a strong foothold.
Toll manufacturing involves outsourcing all or part of the production process to a third-party company, with Dairibord providing the raw materials or semi-finished products under such arrangements. This model is viewed as a crucial step in enhancing operational flexibility and expanding market reach.
Dairibord manufactures and markets a variety of milk, food, and beverage products. In a financial statement for the year ending December 31, 2024, company chairman Mr. Josphat Sachikonye acknowledged the challenges facing the group in a complex and volatile domestic environment, marked by evolving regulatory policies and currency fluctuations.
He noted that high input costs, a heavy tax burden, and pricing pressures remain significant obstacles. However, he emphasized that the company is addressing these challenges by optimizing operations, investing in capacity enhancement, and leveraging technology to strengthen its product offerings.
“A strong emphasis is being placed on regional expansion through export growth and the toll manufacturing model in South Africa to diversify revenue streams and increase foreign currency earnings,” he said.
Cost reduction remains a strategic priority, with comprehensive measures underway to minimize expenditures. “Furthermore, securing a stable, low-cost raw milk supply through robust out-grower support programs is essential for maintaining a competitive advantage,” Sachikonye added.
In the period under review, the company received 42.2 million litres of raw milk from farmers, marking a 49 percent increase over the previous year and securing a 37 percent market share. The group achieved a consolidated volume growth of 10 percent, driven by strong performance in the liquid milks and foods categories, although beverage growth was marginal at one percent.
Increased raw milk supply, with notable market share gains across Chimombe, Steri, and Lacto, drove the 20 percent growth in liquid milks. Sales volume from the Foods segment rose by 47 percent, led by Yummy yoghurt and ice cream, while improved product availability bolstered Rabroy Tomato Sauce sales.
Exports grew by 13 percent year-on-year, contributing eight percent to total sales revenue, up from six percent in the previous period.
Mr. Sachikonye indicated that despite domestic macroeconomic challenges, the group posted a profit for the year of US$3.78 million, compared to US$103 million in the prior year. The company's operating cash flow improved due to enhanced profitability in cash terms.
To improve liquidity, Dairibord is implementing measures to accelerate inventory turnover by shortening the cash operating cycle and tightening its credit risk management practices to reduce the risk of customer default. The company noted that an increase in the value of inventories by US$2.58 million and assets reclassified for sale totaling US$3.7 million left the firm in a liquid position.
“Effective January 1, 2024, the group designated 25 assets as held for disposal after meeting the IFRS 5 criteria. The sale was highly probable, and the group initiated an active program to locate buyers by signing a mandate for property disposals with three property agents in mid-January 2024.”
Dairibord's expansion into South Africa through toll manufacturing is expected to enhance its competitive edge in the region, ensuring sustainable growth and increased revenue generation.
The dairy processor, which already supplies products to key regional markets such as Botswana, South Africa, Malawi, and Mozambique, believes that toll manufacturing will solidify its footprint in South Africa and strengthen its regional presence.
Although Dairibord Zimbabwe officially divested from its Malawian operations in 2019, it continues to export to that market, maintaining a strong foothold.
Toll manufacturing involves outsourcing all or part of the production process to a third-party company, with Dairibord providing the raw materials or semi-finished products under such arrangements. This model is viewed as a crucial step in enhancing operational flexibility and expanding market reach.
Dairibord manufactures and markets a variety of milk, food, and beverage products. In a financial statement for the year ending December 31, 2024, company chairman Mr. Josphat Sachikonye acknowledged the challenges facing the group in a complex and volatile domestic environment, marked by evolving regulatory policies and currency fluctuations.
He noted that high input costs, a heavy tax burden, and pricing pressures remain significant obstacles. However, he emphasized that the company is addressing these challenges by optimizing operations, investing in capacity enhancement, and leveraging technology to strengthen its product offerings.
“A strong emphasis is being placed on regional expansion through export growth and the toll manufacturing model in South Africa to diversify revenue streams and increase foreign currency earnings,” he said.
In the period under review, the company received 42.2 million litres of raw milk from farmers, marking a 49 percent increase over the previous year and securing a 37 percent market share. The group achieved a consolidated volume growth of 10 percent, driven by strong performance in the liquid milks and foods categories, although beverage growth was marginal at one percent.
Increased raw milk supply, with notable market share gains across Chimombe, Steri, and Lacto, drove the 20 percent growth in liquid milks. Sales volume from the Foods segment rose by 47 percent, led by Yummy yoghurt and ice cream, while improved product availability bolstered Rabroy Tomato Sauce sales.
Exports grew by 13 percent year-on-year, contributing eight percent to total sales revenue, up from six percent in the previous period.
Mr. Sachikonye indicated that despite domestic macroeconomic challenges, the group posted a profit for the year of US$3.78 million, compared to US$103 million in the prior year. The company's operating cash flow improved due to enhanced profitability in cash terms.
To improve liquidity, Dairibord is implementing measures to accelerate inventory turnover by shortening the cash operating cycle and tightening its credit risk management practices to reduce the risk of customer default. The company noted that an increase in the value of inventories by US$2.58 million and assets reclassified for sale totaling US$3.7 million left the firm in a liquid position.
“Effective January 1, 2024, the group designated 25 assets as held for disposal after meeting the IFRS 5 criteria. The sale was highly probable, and the group initiated an active program to locate buyers by signing a mandate for property disposals with three property agents in mid-January 2024.”
Dairibord's expansion into South Africa through toll manufacturing is expected to enhance its competitive edge in the region, ensuring sustainable growth and increased revenue generation.
Source - the herald
