Dairibord offloads Malawi unit

DAIRIBORD Holdings (Dairibord) says it was forced to let go of its Malawi unit by the adverse economic situation in Zimbabwe after it failed to leverage its “clean” balance sheet to rescue the ailing subsidiary.
The Zimbabwe Stock Exchange-listed milk processor announced last week that it was offloading Dairibord Malawi following consistent weak performance of the business, adding that the exit process is anticipated in the second quarter of 2019.
Antony Mandiwanza, Dairibord’s chief executive, said the group had to let go of the Malawi business even though there was a business case for capitalising it.
“There was a compelling business case, the market is there and the supply of raw milk is there,” Mandiwanza told an analyst briefing last week.
“But we were not able to capacitate it by way of investment because of challenges in Zimbabwe, where we reside as a holding company. That was our biggest problem and as a result the company continued to experience difficulties,” he said.
Mandiwanza said the group considered various options before folding.
“One was to attract potential investors through an equity arrangement but that was not successful. Banks were quite willing to support the capitalisation project but they needed the security of the holding company which we were not able to do because of our own local circumstances precluding us from doing so. So the final decision was that we cannot continue to incur losses and eat into the shareholders value,” he said.
Mandiwanza said the group’s failure to put up security for funding was because of country specific systemic challenges and no fault of its own as it has a “clean” balance sheet.
Weighing in, Mercy Ndoro, the group finance director confirmed that the group had capacity to source funding.
“Our balance sheet is very clean at the moment and we are happy with that position because it means we are in a position to leverage the balance sheet to pursue any opportunities that may arise in the market,” she said.
In its unaudited results for the year ended December 31, 2018 that were published last week, the group says the Malawi subsidiary, which has now been classified as held for sale and accounted for as a discontinued operation, posted a loss after tax of $0,7 million in 2018, an increase of 17 percent on the prior year loss “due to continued working capital constraints”.
Overall, the group reported a profit after tax of $6,48 million, which represents a considerable increase from a profit of $1,95 that was realised in the previous comparable period.
Volumes sold from continuing operations increased by three percent “largely driven by liquid milks which benefited from increased raw milk intake”.
Revenue grew by 28 percent to $126,4 million “driven by volume growth and selling price adjustments”.
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