Sugar Surtax Adds US$2.26 Million Burden on Dairib...

Sugar Surtax Adds US$2.26 Million Burden on Dairibord

Zim Now Writer

Dairibord Holdings Limited says it incurred an additional US$2.26 million in expenses in 2024 due to the newly introduced Special Surtax on sugar content in beverages, a fiscal policy change that significantly affected the company’s cost structure.

This development, coupled with the reclassification of milk under Value Added Tax — which cost the business a further US$630,000 — saw the group absorb nearly US$3 million in new tax-related costs during the financial year.

The new tax regime arrived at a time when Dairibord was already navigating a challenging operating environment characterised by exchange rate volatility, prolonged power outages, erratic fuel supply, and inflationary pressures.

Despite these headwinds, the dairy processor recorded a 6% growth in sales volumes to 94.5 million litres, the highest in over a decade. Revenue for the year rose by 44% in inflation-adjusted terms to ZWL$1.5 trillion, while in historical terms, turnover stood at ZWL$660.4 billion — up 415% from the prior year.

Dairibord credited its revenue growth to product mix optimisation, improved pricing strategies, and operational efficiencies. However, these gains were partially offset by rising input costs and the tax-induced strain on its margins. Gross profit increased by 30% to US$31.73 million, but operating profit declined to US$6.2 million from US$10.3 million in 2023.

The group also reported that operating expenses increased by 34% to US$26.3 million due to inflation and the ongoing need to maintain operations in an unstable power and fuel supply environment.

Electricity outages significantly disrupted production, with the group relying heavily on diesel-powered generators to maintain supply — further adding to its cost base.

Dairibord’s Chief Executive Officer, Anthony Mandiwanza, acknowledged the difficulties posed by the evolving tax landscape.

“The introduction of the sugar surtax and VAT on milk products has had a material impact on our operating costs. These changes have narrowed our margins and made it more difficult to pass costs onto the consumer in a price-sensitive market,” he said.

The company maintained a cautious outlook for 2025, with plans to strengthen working capital management by improving inventory turnover, reducing debtor days, and enhancing credit control.

It is also investing in more energy-efficient equipment and exploring alternative power sources to mitigate reliance on diesel and grid power.