Dairibord Holdings Limited says it has secured an investor for the acquisition of its Malawi subsidiary and the transaction is expected to be finalised soon.
Chairman Josphat Sachikonye said the disposal of Dairibord Malawi was expected to be concluded last month, as deliberations had reached an advanced stage.
The food and dairy processor resolved to sell the Malawi unit due to perennial losses, as it had become the group’s problem child impacting negatively on overall group performance.
“The disposal process for Dairibord Malawi is at an advanced stage. An investor has been secured and parties are in the process of finalising the deliverables in line with agreed terms,” said Mr Sachikonye in a statement accompanying the group’s financials for the half year to June 30, 2019.
During the six months to June 30, 2019, Dairibord Malawi posted a loss for the period of $293 000 on depressed performance across all major financial indicators.
Meanwhile, Dairibord’s revenue for the half year to June 30, 2019 jumped 139 percent to $118,1 million on the back of volumes growth as well as gradual price adjustments in line with market conditions and cost push pressures.
Mr Sachikonye indicated that the price adjustments were below the depreciation exchange rates as the company sought to balance viability with affordability of products.
“The ability to pass on to the consumer the full impact cost increases was constrained by declining disposable incomes,” said Mr Sachikonye in a statement accompanying the group’s financials.
The period under review was characterised by several policy reforms that had an impact on the business environment, for instance floating of the exchange rate, the reintroduction of local currency, removal of the multi-currency system for local transactions as well as the increase in the Reserve Bank overnight accommodation rate to 50 percent from 15 percent.
Volumes grew 3 percent to 40,3 million litres, but growth was constrained by worsening supply of inputs.
By portfolio, liquid milks and beverage volumes grew 13 percent and 3 percent respectively while foods went down 26 percent compared to same period in the prior year.
Raw milk intake grew 22 percent ahead of the national average growth of 14 percent.
“Raw milk intake continues to grow in response to the group’s efforts to close the demand supply gap for milk products in the country as well as reducing dependence on imported milk powders,” Mr Sachikonye said.
During the period under review, operating costs increased 123 percent against revenue growth of 139 percent.
Resultantly, an operating profit of $12 million was recorded compared to $0,9 million achieved in the prior year comparable period.
Following the liberalisation of exchange rates in February and translation of foreign obligations to local currency, the business incurred a foreign exchange loss of $5,9 million.
After accounting for foreign exchange losses and interest bill of $0,3 million, the business recorded a profit before tax of $6,1 million compared to $0,7 million recorded in the same period last year.
Profit for the period under review came in at $3,7 million from $270 000 in the prior year comparable period. Basic earnings per share grew to 1,13 cents from 0,1 cents.
Total assets grew by 47 percent to $116 million from $78,5 million.
Foreign denominated liabilities closed the period at US$1,85 million from US$3,96 as at December 31 2018.
Interest bearing borrowings increased to $17,3 million from $3,7 million at December 31, 2018, with $6,8 million arising from foreign exchange losses on the foreign losses.
Sachikonye said in view of the rising rates and constrained liquidity; the company will therefore focus on attention on strategic borrowings going forward.
The company will also focus on supporting viability and growth of milk supply chain as an import substitution, cost reduction as well as reducing foreign currency liabilities and developing export initiatives in the region.
Dairibord did not declare a dividend.