Dairibord explores greenfield projects

21 Sep, 2018 - 00:09 0 Views
Dairibord explores greenfield projects

eBusiness Weekly

Tawanda Musarurwa
Listed milk processor Dairibord Holdings says it has engaged investors from New Zealand to explore the establishment of greenfield milk projects in Zimbabwe.

A greenfield project — in simple terms — is a project that is built from scratch and it lacks constraints of prior work and there’s no existing building or infrastructure.

The group is focused on the need to resuscitate national milk production and has said it is necessary to explore joint venture (JV) arrangements with strategic investors to venture into green-field milk production projects.

Dairibord CEO Anthony Mandiwanza said they have discussed the possibility of greenfield milk production projects with the New Zealand investors.

“Recently I was entertaining some investors from New Zealand who are looking for greenfield investment opportunities to grow milk,” said Mandiwanza, adding that Zimbabwe “is not yet producing sufficient milk to meet potential demand for the domestic market and exports”.

Rise in 2018
Official statistics show that national milk production rose by 12 percent in the first six months of 2018, prior comparable period.

According to statistics from the Zimbabwe Association of Dairy Farmers (ZADF), milk production for the first six months was up 12 percent to 34 771 019 litres from 31 193 733 prior year comparative.

Last year, national dairy production was 67 million litres against national demand of 120 million litres, but ZADF, in its Strategic Plan (2018-2022) plans to grow production to 131 million litres.

Big production gap
Milk production in Zimbabwe experienced a dip from the early 1990s peak of 260 million litres annually to an estimated 50 million litres to 65 million litres as the industry battle challenges that have been bedevilling the economy in the past decade.

Zimbabwe has a per capital milk consumption of less than 30kg.

This is compared to average per capita global milk consumption amounts to about 100kg of milk/year, while per capita consumption in Western Europe is in excess of 300kg of milk/year.

The CEO has said Dairibord is also looking for an equity partner to recapitalise the business, but would turn down an outright sell-off.

“Ideally what we would want is a partner for a 49 /51 percent and inject capital so that we can recapitalise,” he said.

“We will be averse to an investor who would seek an outright purchase.”

Investor confidence
Mandiwanza is also optimistic of growing investor confidence in Zimbabwe, and believes that at the macro-level, investor commitments that have been made will be full filled in due course.

“Obviously these things will not happen in the next six months. We anticipate traction to be gained beginning of 2019, that is where realistically we will begin to see traction on the promises that have already been made or commitments that have been signed by the international investing community,” he said.

Meanwhile, for the six months to June 30, 2018, the group’s revenues rose by 15 percent from the prior comparable period to $50,9 million and EBITDA (earnings before interest, tax, depreciation and amortisation) increased 18 percent to $3,5 million (with an EBITDA Margin of 6,8 percent).

Production indicators were positive, with volumes growing 6 percent to 41 million litres despite supply constraints for both packaging and raw materials for key product lines.

Overall, EBIT came in at $0,7 million (EBIT Margin of 1,4 percent) and profit after tax (PAT) was $0,27 million, giving a PAT margin of 0,5 percent and an earnings per share (EPS) of $0,10c per share.

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