Delta in record sorghum beer sales . . . Forex challenges pose serious threat . . . More than $100m in foreign payment obligations backlog . . . Associates also facing similar forex challenges

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Pearson Gowero

Kudzanai Sharara
The country’s biggest brewer Delta Corporation, reported significant growth in both volumes and revenue for the year ended March 31, 2018, but the out-turn could have been more had the brewer not experienced interment product supply shortages as a result of limited access to foreign currency for the importation of key raw materials.

The company CEO Pearson Gowero, told analysts midweek that revenue had gone up by 18 percent to $572 million, while earnings before tax depreciation and amortisation grew by 19 percent to $134,1 million.

Attributable income grew by 27 percent to $88,8 million resulting in earning per share of 7,22 cents. With a cash pile of $210 million, the Group declared a final dividend per share of 2,7 cents to take the total dividend for the year to 7,20 cents.

This was also after improved operating margins to 20,75 percent from 19,07 percent prior year comparative.

For the first time in five years, the beverages maker recorded very firm demand across the brand portfolio resulting in strong growth in lager beer volumes, up 27 percent to $274 million with the contribution from premium brands also increasing from prior year’s levels.

This saw lager beer’s contribution to operating income almost doubling to $40,2 million from $22,8 million beating last year’s top contributor sorghum beer with a contribution to operating income of $36, 4 million, though up from $34,9 million prior year comparative.

The positive out-turn was also experienced in the sparkling beverages business where both volumes and revenue went up by 14,7 percent to 1,420 million litres and 12,9 percent to $174 million respectively.

Again the share of convenient packs went up to 42 percent from 40 percent prior year comparative.

However, performance for this segment could have been more had it not been affected by supply limitations on account of imported inputs shortage, which resulted in acute shortage of packaging.

There was also increased competitor activity although Gowero said the Group’s market share was stable.

He said the business was ready for the competition posed by the market’s new entrant and Pepsi bottler, Varun Beverages, which has been selling its products cheaper than what Delta’s products have been retailing at.

Volumes and revenue from sorghum beer recovered from last year’s dip to reach all-time highs of 3,819 million litres in volume and $205 million in revenue generated.

The share of Chibuku Super in the product mix continued to grow to 71 percent from 60 percent prior year.

Gowero said although Chibuku Super has continued to grow to become the dominant offering, the new scud was also taking root with “improved aesthetics and an accessible price point.”

As with the other businesses, the performance could have been better had the business not faced packaging induced supply constraints in the second half due to inability to import raw materials.

Going forward, demand is expected to continue to be firm on the back of reasonable agricultural out-turn and improvements in other economic sectors such as mining and tourism.

The forthcoming election is also expected to increase spending on beverages as political parties hit the campaign trail and also try to lure votes.

Forex challenges pose serious threat

But for this to happen (meeting increased demand), the country will have to first optimise its foreign currency management system and recognise linkages in the economy.

Foreign currency shortages did not only have an impact on raw material shortages with the brewer owing foreign creditors $46 million but also loan repayments of approximately $25 million. Delta is also sitting on $60 million, which could not be repatriated to foreign shareholders as dividends.

Delta has import requirements of between $60-$75m per year.

The scourge also affected its associate companies with Schweppes Zimbabwe having faced shortage of imported raw materials. Value chain partners such as Nampak Zimbabwe are also in the same bracket with the business facing raw material supply challenges constraining strong demand.

“Value chain partners also affected by the forex situation as packaging supplies are not prioritised.”

Afdis is also facing similar challenges with volume performance slowing down due to delayed foreign payments resulting in shortage of packaging and raw materials.

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