Speaking at the company’s 17th Annual General Meeting last week, DHZL chief executive officer Anthony Mandiwanza, told shareholders that management had taken a pro-active stance that would help mitigate challenges facing the company.
“We introduced long-term debt of US$4 million, with an 11% interest rate from the PTA Bank. It has a generous 12-month grace period,” said Mandiwanza. He said the funds, which are designed as a five-year facility, would be channelled towards working capital management and projects that the company has in place.
The company is also planning on disposing of its stake in Malawi-based operation, Mulanje Peak Foods, as part of measures aimed at concentrating on milk production business.
“The disposal of Mulanje Peaks is currently ongoing,” said Mandiwanza. “We have identified two potential business people to buy the plant. Management is doing a due diligence (exercise), although there are challenges in raising the necessary deposits at the moment.”
Dairibord Malawi Limited acquired a canning business located in the Mulanje District of Malawi in 2006, which is presently 100%-owned by the Dairibord Holdings.Last year, the group also disposed of its stake in Interfresh for US$840 000 and the proceeds were channelled to fund capital projects.
Mandiwanza downplayed concerns raised by a shareholder about the extent to which political changes in Malawi would have a material effect on the company’s operations.
He expressed hope that the Malawi government would provide policy guidance as this would ultimately informed business sentiment. “With regard to milk supply, per capita consumption in Malawi currently stands at five litres while in Zimbabwe the figure is eight litres per annum per person,” said Mandiwanza.
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“There are great opportunities to increase business operations in Zimbabwe.” In the 1990’s at the height of sustained and consistent agricultural production, per capita consumption used to be 25 litres on average in Zimbabwe.
High raw milk prices pose operational challenges
Turning to raw milk price per litre, Mandiwanza told shareholders that the high price range pervading in Zimbabwe posed a strategic challenge to the operations.Raw milk prices stand at US$0,40 cents per litre in Malawi, US$0,60 cents per litre in Zimbabwe, US$0,45 cents per litre in Zambia and US$0,41 cents per litre in South Africa.
“This (price range) affects the value chain system right down to the finished product,” said Mandiwanza. “The price becomes much higher, which will have a negative impact on demand due to increased cost structures.”
