Dairibord to start toll production in SA

DAIRIBORD Holdings is expanding its operations in the region to drive export growth, with South Africa being the immediate destination for a planned toll manufacturing project, which the group believes will help diversify revenue streams and boost foreign currency earnings.

This comes as Dairibord already has a product supply presence in key regional markets, including Botswana, South Africa, Malawi and Mozambique.

Zimbabwe’s largest dairy processor believes that toll manufacturing can strengthen the group’s footprint in South Africa and solidify its regional presence.

Although Dairibord Zimbabwe officially divested from its Malawian operations in 2019, the company continues to export to that market, maintaining a strong foothold there.

Toll manufacturing involves outsourcing all or part of the production process to a third-party company, with Dairibord looking to provide the raw materials or semi-finished products under such arrangements. This model is seen as a vital step in enhancing operational flexibility and expanding market reach.

Dairibord manufactures and markets a variety of milk, food and beverage products.

In a statement of the group’s financials for the year ending December 31, 2024, company chairman Mr Josphat Sachikonye acknowledged the challenges the group continues to face in a complex and volatile domestic environment, which has been characterised by evolving regulatory policies and currency fluctuations.

Josphat Sachikonye

He noted that high input costs, a heavy tax burden and pricing pressures remain significant obstacles.

However, Mr Sachikonye said that the group was addressing these challenges by optimising 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, Mr Sachikonye noted, remains a strategic priority, with comprehensive measures underway to minimise expenditures.

“Furthermore, securing a stable, low-cost raw milk supply through robust out-grower support programmes is essential for maintaining a competitive advantage,” he added.

In the period under review, the group received 42,2 million litres of raw milk from farmers, marking a 49 percent increase over the preceding year and 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 operations were constrained by a marginal one percent growth in beverages.

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 prior 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 the prior year.

The group’s operating cash flow improved from the prior year’s comparative period due to improved profitability in cash terms.

To improve liquidity, he said the group 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 group noted that an increase in the value of inventories of US$2,58 million and assets reclassified for sale totalling 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 programme to locate buyers by signing a mandate for property disposals with three property agents in mid-January 2024.”-chroncile