Published: 26 May 2014

DZLH volumes for the first four months up to April 2014 remained static on account of weak demand while the operating environment is expected to remain challenging, group CE Anthony Mandiwanza told an AGM today.

Mandiwanza said sales were static on account of weak demand and the raw milk intake was above prior year benefiting from milk development programmes.

Raw and packaging materials were 13% below the same period last year while labour costs were 8% below last year and repairs and maintenance were down 19%.

 "The operating environment will remain challenging characterised by low disposable incomes, deflation and low investment. However, the performance of the business will improve driven by new products and line extensions; new plant and equipment will also help to increase capacity and improve efficiencies," added Mandiwanza.

Giving the outlook of the group, he told the meeting that favourable trends in global commodity prices will result in reduced costs for key materials particularly milk powders and sugar.

He added that the introduction of import duties and a ban on some agricultural produce will help avert the impact of cheaper imports.

New plant and equipment is also expected to increase capacity and improve efficiencies at DZL.

Commenting on Malawi, where the company has a subsidiary, Mandiwanza said; "Availability of foreign currency remain a critical and challenging issue, supply of electricity and cost of utilities impact negatively on the business in Malawi but we still continue to see opportunities going forward."

On the aspect of investment he said, "We have a plant stationed at Chitungwiza, we are commissioning and launching the new product by the 21st of this month".

According to Mandiwanza the new plant will expand the revenue streams for the group and enable the business to compete in all segments.

"We identified a critical need of water, we have been literally running a backyard arrangement and we are almost finishing the commissioning of that plant and product should be in the market by the 1st of June"

He said that there are gaps in the market for some products and as a result they "have secured the plant for ice cream cones and sticks and will be commissioned on the 15th of August."

The plant will increase the sales volumes from line extensions.

Moving to the Heifer importation programme, he noted that it is progressing according to plan and this is expected to result in increased milk production and cost reduction through substitution of expensive milk powders.

Another initiative is the Steri plant which is expected to be commissioned in November 2014. Meanwhile, on financing, Mandiwanza added that they are considering a capital raise to fund milk production and build brands saying they are expecting growth in milk supply and improved competitiveness from new investments.

Total expenses for the group reduced by 10% and Mandiwanza said "the reduction in operating costs is a result of the cost reduction initiatives deployed by the group.

"Management will continue to streamline the business to improve efficiencies through research and development, new investment and consolidation of operations," he said.

 Utilities (electricity, water and coal) particularly electricity has driven the utility cost to 20% above last year because of error correction by Zesa.

The group's directors were re-appointed and fees of $171 897 approved while auditors Ernst and Young Chartered Accountants were re-elected with remuneration of $278 640 also approved.
- zfn

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