Dairibord Holdings will commission five new plants this year under a $10 million capital expenditure programme to grow its revenues and cut down costs to overturn the loss suffered in the year to December 31, 2013. Group chief executive Mr Anthony Mandiwanza told the group’s annual general meeting on Friday that the group would commission new facilities between May and November.
The capital expenditure would be funded from a mix of own resources and $6 million loan obtained from PTA Bank at cost of 10,3 percent per annum all-in costs.
However, the firm would soon approach shareholders for funding to complete the heifer importation programme for own milk production, also, to cut costs, which Dairibord contends was key for growth going forward.
Daribord posted an operating loss of $1,8 million last year against $9,8 million profit the year and contends revenue growth and cost reduction is key to change its fortunes.
Mr Mandiwanza said Dairibord would commission the first of the new facilities on Wednesday to enable the company to introduce a new product.
“We are completing that process. It will expand our revenue streams, critical in terms of realigning the business, which is critical to grow the business and address the cost of doing business,” Mr Mandiwanza said.
“The product plant will expand revenue streams for the group and enable the business to compete in all segments.”
Dairibord is looking forward to commissioning an aqua-lite plant by June, an ice cream plant by August while yoghurt plant is expected to come on line by November.
“For ice creams, the plant has been secured. It will be commissioned by August 15 and will produce a range of ice creams including sticks and cones,” said Mr Mandiwanza.
The ice cream plant is expected to increase sales volumes from line extensions and improve production efficiencies. Procurement of the yoghurt plant is underway and is expected to increase volumes from line extensions and also enable the company to compete in all segments.
The Dairibord chief executive said the aqua-lite plant, being commissioned but set for completion in June, would boost production capacity and enable the company to meet existing demand for bottled water.
Mr Mandiwanza said procurement of the sterilised milk plant and equipment in Chipinge was already in progress with commissioning expected by end of November. The plant upgrade would improve production efficiencies and product presentation. Once the steri-milk plant is completed the one in Gweru would be closed.
A host of other initiatives are underway to boost production, but taking complete control of growth in costs. These include procuring inputs at the lowest prices, new cost effective product formulae to open margins.
Dairibord is drilling boreholes for its Malawi dairy processing unit to reduce dependence on expensive municipal water, replacing a diesel boiler with a coal boiler in Malawi and reducing boiler sizes to cut consumption.
Streamlining of operations is ongoing to eliminate duplication. The locally listed dairy processor said savings would be realised in labour, utilities and distribution.
The cost containment programme has yielded results after cost went down by 10 percent on year to date basis despite utilities going up by 20 percent due to what Mr Mandiwanza attributed to incorrect billion by Zesa.
Raw milk cost was unchanged but materials went down 13 percent, labour 8 percent, repairs and maintenance 19 percent and other expenses 22 percent.
Mr Mandiwanza said a difficult operating environment punctuated by low disposable incomes, deflation and low investment would continue into the foreseeable future.
However, the Dairibord CEO sees opportunities but trends in terms of volumes of business and costs to maintain the current pattern until at least the half year period.
These would come through new products and line extensions, new plant and equipment to increase capacity and efficiency, favourable trends in global commodity prices (especially milk powder and sugar) and introduction of import duties and ban on some agricultural.
“We remain relatively confident that we are doing what is right to put the business in the right direction,” he said.
Dairibord was last year largely weighed down by declining consumer prices and rising cost of doing business, which was compounded by increasing labour costs, utilities, depreciation and rising cost of materials.
The AGM unanimously approved all items on the agenda including reelection of chairman Dr Leonard Tsumba, auditors’ fees, and retaining Ernst and Young as auditors for the ensuing year and directors’ fees.