ZIMBABWE – Beverages manufacturer Delta Corporation, (Delta), plans to spend nearly $50 million in capital projects aimed at buttressing its operating capacity.
Matts Valela, Delta financial director told businessdaily last week at the company’s analysts briefing that part of the capital expenditure (capex) would be used to invest in performing units to cushion the group.
“Pegging capex at this early stage is still a bit of a challenge taking the economic conditions into account; however, we are likely going to heavily invest in the sorghum beer plant earmarked for Masvingo next year,” he said.
“A rough estimate for the establishment of the new plant is around $18 million depending on the type of infrastructure already present at the site,” added Valela.
Delta also plans to replace part of its aging vehicle fleet as well as sprucing up its manufacturing plants.
This comes as the Zimbabwe Stock Exchange-listed concern has been relying on its sorghum products — particularly Chibuku Super — to boost revenue in the face of declining economic conditions that have resulted in low consumer spending.
For the year to March 2015, sorghum beer was up eight percent on prior year driven by the Chibuku Super, according to Delta, supply of Chibuku Super improved in the last quarter of the year with the brand attaining a 50 percent contribution by March 2015.
Delta currently has a new Chibuku Super production facility in Bulawayo, scheduled for commissioning by July 2015 and is expected to assist in closing the supply gaps.
Valela noted that the SABMiller associate was also exploring ways in which it could boost its toll malting for export into regional markets.
“Of our capacity, over half of the 35 000 tonnes we produce annually, is absorbed by the local market, we are looking at exporting to countries beyond Zambia, which we are currently supplying with over 8 000 tonnes,” he said, adding malt prices were determined by global prices.
Valela said the group also wanted to invest into making its premium brands more attractive to the market.
“We are also looking into revamping our premium brands so that they keep performing well, for the last year, they cushioned the company, so we want to improve them,” Valela said.
The listed blue chip counter’s profit declined by 12 percent to $92,8 million in the full year to March 2015 from $104 million. It’s maheu and dairy mix beverages were also up 11 percent for the year.
Valela said the group wanted to adopt a strategy were it would capitalise on the units that were contributing to the bottom-line, to manage the softening demand for the lager unit, whose volume was down 17 percent for the period under review.