Long-term performance of ZiG is yet to be established: Dairibord

Dairibord Holdings Limited’s latest financial results have highlighted the uncertainty surrounding the long-term performance of the Zimbabwe Gold (ZiG) currency.

The Zimbabwe Stock Exchange listed company has released its half-year financial results for 2024, showing a 12.87% increase in revenue to US$54.71 million, driven by volume growth and strategic price adjustments.

Despite the growth in revenue, the company’s EBITDA declined 53.32% to US$5.09 million due to increased costs and working capital pressures. However, the group managed to turn around its US$0.74 million loss from the prior period to post a profit after tax (PAT) of US$3.06 million.

The long-term performance of ZiG currency, introduced in April, is yet to be established, posing currency risk for Dairibord. Foreign currency revenue accounted for 76% of total revenue, easing from 84% in December 2023.

“We expect Dairibord’s change in functional and presentation currency to US$ to deliver a better representation of the Group’s financial performance and provide greater transparency to investors.

“Although foreign currency revenue accounted for 76% of Dairibord’s total revenue for the period, this is an easing from the 84% reported as at December 2023.

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“Although this is in line with the general market shift towards ZIG, it also represents increased currency risk for Dairibord as the long-term performance of the ZiG is yet to be established,” the company noted.

Dairibord’s raw milk intake increased by 40% year-on-year, solidifying its market share at 36%. Liquid milks registered substantial growth of 21%, while foods gained 25% volumes. However, beverages contracted by 8% due to price adjustments and scarcity of small change.

The company’s export position strengthened, with exports contributing 9% of overall sales, a 59% increase from the previous period.

Dairibord faces a challenging operating environment due to prevailing drought conditions, which are expected to impede overall economic growth, induce food inflation, and reduce raw milk production.

Revenue is expected to grow by 3.7% to US$119.87 million, with EBITDA margin remaining depressed due to inflationary pressures.

Management’s focus on cost reduction and expansion of export activities, including full commercialization of toll manufacturing operations in South Africa, is expected to drive growth.

Dairibord spent US$1.15 million on property, plant, and equipment (PPE) during the period, a fraction of its US$24 million capex budget.

The board resolved not to declare a dividend for the period to reinvest in the business.