adminBusiness Reporter
FINANCIAL analysts have forecast Dairibord Holdings Limited’s revenue to remain largely flat around US$108 million this year following the slow growth in the top line during the first half of the group’s financial year.Inter Horizon Securities in its latest Dairibord half-year earnings update believe the group may only manage a marginal 1,7 percent growth in revenue after a constrained first half due to costs of restructuring the group. But Dairibord has already seen some improvement in operating costs in July and August post the rationalisation exercise, which has reduced the wage bill.
After a 6 percent wage increase awarded in 2013, it is expected that going into 2014 further increments will be more subdued.
“We now downgrade our previous growth forecasts given a highly constrained H1 performance. We estimate that 2013 revenue will be relatively flat at US$108,7 million, up just 1,7 percent year on year,” IH Securities said.
IH Securities said they estimate some earnings before interest tax recovery to 3 percent, yielding lower EBITDA of US$6,3 million in 2013 against US$12,1 million in 2012 and profit after tax to close 2013 at US$2,1 million against US$7,1 million in the prior comparative period.
Financial analysts see the stock, with a US$68 million market capitalisation on the Zimbabwe Stock Exchange, fully valued at US17c.
Dairibord experienced subdued revenue growth of just 1 percent in 1H13, slower than the average 5 percent growth that has generally been reported in comparable consumer stocks in trading updates for the year.
While consumer purchasing power has clearly slowed down, Dairibord appeared more susceptible to competition in the market, with the proliferation of imports and the weakening of the SA rand making local processors in the dairy processing sector less competitive.
Revenue for the first half of 2013 came in at US$49,1 million, 1 percent up the same period from US$48,6 million in the first six months of last year. Volumes in liquid milks were up 8 percent on the prior half-year comparative period.
Foods volumes went up by 13 percent while beverages declined by 12 percent, which was attributed to production stoppage during the rationalisation process in the first half as well as capacity challenges in water.
The reduction in the unit size of Cascade from 500 ml to 400ml also resulted in decreased volumes, however increasing, in value per litre.
An operating loss of US$3 million was recorded in the first half of 2013 versus an operating profit of US$4,4 million in the first half of 2012.
The loss was largely attributed to costs incurred related to retrenchment packages, relocation of plant and equipment and impairments of equipment, spares and receivables amounting to US$4,3 million.
Simultaneously operating costs were up by 8 percent for the period driven by increments in key raw materials and labour expenses, milk powders as a case in point saw a 22 percent price increase from 2012 stimulated by rising commodity prices, while unionised employees received a 6 percent wage increase in the 2013 interim period.
Net income came down from US$2 million in the 2012 interim (earnings per share US0,88c) to a loss of US$3,4 million in 2013 first half (no dividend was declared in light of the subdued financial performance.
The group’s borrowings grew by just under a US$1 million to reflect a gearing ratio of 15 percent, capex for the period came up to US$2,3 million with investment made in cold chain facilities, distribution vehicles and the commissioning of salad cream and tomato sauce lines.
Online Reporter