DZL eyes growth

The company said this was due to a mismatch between revenue, volumes and costs.
DZL saw revenue increasing by only 11 percent to US$107 million vis-avis the previous year.

But the costs increased faster, jumping 14 percent on the 2011 comparative period to weigh down on profit. Volumes also trailed costs, despite rising by 10 percent.
The profit for the year to December 2012 was little changed at US$7,1 million, compared with US$7 million achieved in the prior comparative period, although revenue went up from US$95 million to US$107 million last year.

Earnings per share increased marginally from US1,97c to US1,98c and directors declared a US0,45c dividend per share.
DZL chief executive Mr Anthony Mandiwanza said that plans were afoot to address the mismatch between revenue, volumes and costs running ahead of the two, which had the effect of reducing the group’s bottom line in 2012.

“There is a challenge between our revenue, volumes of our activities and cost structures, which are impacting on the bottom line and it is important that we address those specific issues,” he said, when presenting the results to analysts on Wednesday.

Mr Mandiwanza said there was need to grow revenue, volumes and to attend to the high cost structure in order to open up the margins. In that regard, the dairy processing group had identified three strategies to resolve the challenges.

As a result, DZL will suspend production activities at its Bulawayo and Mutare operations with specific business activities — part of liquid milk, foods, beverages production and logistics business — undertaken there, centralised to Harare and Chitungwiza.

Mr Mandiwanza said the benefits of the restructuring would come in the form of reduced costs from discontinuation of certain support services, such as management and boiler systems used to support these cost centres. He said DZL would also rationalise its head count by reducing the numbers. He said the plant and staff rationalisation would reduce the group’s workforce by at least 12 percent to about 1 500.

“By moving our operations from Bulawayo and Mutare, we will also reduce the number of our contract workers, employed to augment our business operations. That is a key high impact issue,” he said.

“What does that mean in real terms? It means we are looking at more than US$1 million per month that we will get from rationalisation of Bulawayo and Mutare and that will open up our margins.”

Mr Mandiwanza said the rationalisation programme was now at the tail end of implementation and would be completed by the end of this month. This is expected to create a leaner and more effective business structure.

The other strategy DZL will undertake, which it feels is a low-cost high impact initiative, is addressing milk supply shortage by embarking on a heifer rehabilitation programme. The initiative has already resulted in the importation of 250 heifers against a target of 500 dairy milk cows.

The heifers are already producing milk and this would increase milk supply to Dairibord by one million per month and the figure would increase significantly when the calves also reach milk production stage.
Heifer rehabilitation would be extended to Dairibord’s Malawi operations, which recorded less profits this year due to the devaluation of the Malawi kwacha and challenges in milk supply collections.

Despite a 41 percent drop in profit to US$484 000, Dairibord will not divest from Malawi.