Dairibord should be one of the companies to benefit from the import restrictions but dairy products continue to be smuggled into the market so foreign competition remains a challenge and will continue to put pressure on the topline.
Additionally, the company is facing the threat of new entrants in the market with relatively cheaper products.
In the period, revenue declined by 10 percent from $103.4 million recorded in the preceding year to $93.4 million chiefly as a result of price reductions to address affordability and competitiveness.
The company revised prices downwards in the period resulting in a significant 9 percent decline in consolidated average price from $1.23 per litre in the previous year to $1.13 per litre.
Sales volume declined by one percent to 83 million units as a result of lost production although this was partially offsetted by a surge in raw milk intake which was up 18 percent to 31 million litres.
The company experienced supply constraints emanating from the mismatch between raw milk and demand, worsened by delays in the commissioning of the UHT plant.
As a result the company said it lost 2 million litres of liquid milk, a disruption which had a very significant impact on revenue.
Foreign currency shortages also led to supply challenges for raw materials, putting further pressure on volumes.
Nevertheless, Dairibord’s raw milk intake increased 20 percent and was above the 14 percent increase in national raw milk production for 2016 because of better supplies from contracted farmers benefitting from its heifer importation scheme initiated two years ago.
The company’s market share of the national raw milk stood at 47 percent. Additionally the company’s Pfuko/Udiwo product line continues to thrive, with volumes rising 18 percent on increased capacity and additional flavours.
The twin challenges, lower prices and volume decline had a material impact on revenue which declined by 10 percent. In terms of revenue contribution by portfolio, liquid milk and food portfolios contributed 33 percent and 26 percent respectively while beverages accounts for 41 percent with the logistic portfolio contributing less than a percent in 2016.
Liquid milk prices per litre fell 15 percent to $1.09 while food and beverages declined by 9 percent and one percent to $2.21 and $0.87 per litre respectively.
However, Mandiwanza hopes that prices will hold steady after inflation moved into positive territory for the first time in February and looks likely to spiral amid currency challenges.
“The trend of price reduction for the entire portfolio is not expected to continue going forward given the positive shift in inflation from January 2017,” Mandiwanza told analysts.
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