Mamvura’s Market Minute
Delta has long been acknowledged as a barometer of economic activity and the third quarter figures published on Tuesday were certainly way on the upside. The 36 percent jump in lager sales has already been put down to “enjoying” in the period that surrounded Operation Restore Legacy, which certainly accounts for a large share of the quarterly performance that will be hard to challenge in the years and even then decades to come, 36 percent in real terms?
Remarkable! Buoyed by this performance, Delta went on to payout a second interim dividend. When did a company in Zimbabwe last do that? But let’s get this right — the big performer was lager, which is probably about 30 percent of group profits. Much better margins, but it is the drink of the bourgeois (with the highest premium brands consumption north of the Limpopo).
Sorghum still accounts for more than half of group profits and 10 percent rise in volumes in the quarter probably restored earnings in a much more definitive way than lager sales as sorghum was driven by higher margin Chibuku Super.
We also need to remember that the corresponding quarter in 2016 was weak as there were major liquidity issues (there are now probably three times as many swipe machines) and bond notes had only been in circulation for just over a month. In the nine months to December 2016, revenue was down 9 percent and 10 percent for the quarter.
Lager beer volume was 1 percent below prior year for the quarter and down 8 percent for the nine months. So Delta was coming off a lower base. Delta also like to tell us they have the market sewn up and the other high end brands — Heineken, Windhoek, Amstel, etc — don’t figure in the Zim matrix.
That said, Delta having not moved its prices has seen $1,80 retail brands suffering as well as the “grey imports”, which have always accounted for more than Delta has put up its hand for. And then, despite its noble aims, there is the underlying driver of liquidity at present — Command Agriculture, which fed into sales this quarter.
If he was a betting man and could disaggregate the quarter, Mamvura would split the Q3 outcome thus: 30 percent to ORL, Command 30 percent, 20 percent to liquidity and the balance to the decline of foreign brands and sales. When will we ever see a quarter again like this?