Delta Corporation benefits from product, market diversification reports 39% rise in full year revenue

ZIMBABWE – Delta Corporation, Zimbabwe’s largest beverage manufacturer has reported a 39% rise in full year revenue to ZW$ 40.45 billion (US$111.7m) for the year ended March 2021.

The revenue growth, according to the manufacturing giant was driven by inflation induced pricing across all product categories.

Delta operates in four segments: non-alcoholic beverages, sparkling beverages, lager beers and traditional beers.

Its lager beer volumes grew by 17% compared to prior year, with the volume recovery attained mostly during the second and third quarters following the relaxation of the COVID-19 restrictions.

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The Group adopted strategies to stimulate demand through competitive pricing in an environment of weak consumer demand and currency related distortions in value chain costs.

According to the Group Chairman, CF Dube, there are ongoing efforts to inject additional glass bottles to drive volume and enhance consumer choice of brand and pack.

Traditional beer exhibited mixed performance in the different markets

Meanwhile its Sorghum beer volumes in the country, declined by 7% compared to prior year, reflecting a notable recovery in the second half of the year.

The sector was adversely affected by the limited access to key trade channels such as bars, beerhalls and bottle stores which were closed during most phases of lockdowns.

Sorghum beer volume at Natbrew Plc, the company’s Zambian unit, grew by 6% over last year.

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Despite the positive performance, the business faces significant competitive pressure from the illegal trading in bulk beer in addition to the cost pressures arising from the escalation in the cost of imported materials due to the impact of currency depreciation.

The South African entity, United National Breweries is currently implementing volume recovery measures as it was closed for extended periods as the authorities implemented very strict prohibitions on the sale and consumption of alcohol under the COVID-19 national lockdown measures.

On April 2020, the company finalized the full acquisition of the issued shares in United National Breweries (SA) for a consideration of ZAR636 million (US$46m). The acquisition is expected to increase the group’s market share and reduce cost through economies of scale.

The company’s wines and spirit unit, African Distillers recorded a volume growth of 31% compared to the prior year, driven by the spirits and ready to drink categories.

The wine category was adversely affected by the limited trading through on premise consumption outlets during hard lockdowns.

Delta Corporation’s Headline Earnings per share increased by 47%

Soft beverage segment show-cased resilient performance

Delta’s sparkling beverages volume grew by 33% over last year, albeit from a low base.

The business recorded a notable recovery in market share on the back of consistent product supply and competitive pricing.

The category benefits from increased social and economic activities which were significantly curtailed during lockdowns.

Further to that, the group had its franchise territory extended to cover Manicaland Province at the end of the financial period.

Still in the soft-beverage segment, Schweppes Holdings Africa registered a marginal decline in volume by 1% below prior year.

This was an indication of notable recovery in main line crushes and syrups and the benefits from the relaunch of the Minute Maid Juice drinks.

Meanwhile, the company’s packaging unit, Nampak Zimbabwe, is benefiting from the volume recovery in the beverages sector.

However, the order fulfillment rate has been negatively impacted by the shortages of key raw materials such as resins and tinplate from the international markets and the COVID-19 related disruptions to international shipping and freighting.

Overall, Delta’s Earnings before interest and tax grew by 37% to ZW$ 12.15 billion (US$33.5m) over the last year, while its Headline Earnings per share increased by 47% to ZW$ 471.02 cents (US$1.30 cents).

This reflects benefits from the volume recovery, inflation driven stock holding gains and tighter cost management.

Its capital expenditure of ZW$2.2 billion (US$6.07m) was below planned replacement levels due to forex constraints at the front end of the year. This includes the acquisition of the bottling assets of Mutare Bottling Company.

Future outlook

Looking ahead, the businesses in Zimbabwe are expected to record a recovery in volume on the back of improved access to foreign currency through domestic Nostro sales, a stable exchange rate and slower inflation.

Across the border in Zambia, the company is expected to benefit from the election related activities during the year.

“The easing of the lockdown restrictions across the region is expected to rekindle economic activity and consumer spending,” stated Chairman Dube.

It is important to note that the company is currently undergoing executive changes as its Chief Executive Officer, Mr Pearson Gowero is set to retire on 30 June 2021.

He will be replaced by Mr Matlhogonolo Valela who was the company’s Finance Director and has handed over the mantle to Alex Makamure.

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