Delta records impressive volumes growth

Enacy Mapakame LISTED beverages maker Delta Corporation bucked the economic volatility to achieve an overall volume growth during its financial year 2024, which ended on March 31. The year under review was characterised by inflationary pressures and exchange rate volatility, with a hike in credit risk from trading partners. Additionally, the Ukraine war had an […]

May 19, 2024 - 09:43
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Delta records impressive volumes growth

Enacy Mapakame

LISTED beverages maker Delta Corporation bucked the economic volatility to achieve an overall volume growth during its financial year 2024, which ended on March 31.

The year under review was characterised by inflationary pressures and exchange rate volatility, with a hike in credit risk from trading partners.

Additionally, the Ukraine war had an impact on supply chains, affecting prices of inputs; while the company’s regional markets, South Africa and Zambia, were also impacted by weakening currencies, with the latter experiencing a spike in cereal prices due to limited supply and the removal of subsidies.

However, the beverages giant remained resilient during the year under review, with its flagship lager beer segment recording a historic volume of 2,46 million hectolitres for the year, representing a growth of 13 percent compared to the prior year.

The segment continues to be the cornerstone of Delta’s revenue, contributing US$318 million during the year, a 43 percent rise from the US$222,9 million recorded in the prior year.

This segment alone accounted for 41,45 percent of the total group revenue.

As for the sorghum beer segment, total volumes for the Zimbabwe market, including exports, grew by 3 percent over the prior year. This was off a high prior year base.

According to chairperson Mr Sternford Moyo, the volume sold on the domestic market was flat compared to the prior year as the category was significantly affected by disruptions to the route to market, varied account management practices by retail and wholesale partners in a market with improved availability of lager beer and other forms of alcohol.

But in foreign markets, consumption soared by 33 percent to 1,2 million litres in Zambia, and 3 percent to 1,5 million litres in South Africa.

In terms of financial performance, Delta’s sorghum beer business posted robust growth, with revenue rising by 40 percent to US$250,8 million from US$179,7 million. The segment made up 32,68 percent of the total group revenue for the year, supported by both local and international demand.

The sparkling beverages segment outperformed all the other product lines in terms of growth rate as its revenue jumped by 59 percent to US$146,7 million, contributing 19,11 percent to the total group revenue.

The volume of sparkling beverages sold also saw a significant uptick, rising by 29 percent year-on-year to 2 million litres from 1,6 million litres in 2023.

The wines and spirits category recorded a 26 percent revenue growth to US$51,8 million. This steady growth further solidified Delta’s diversified portfolio, though it accounted for a smaller portion of the overall revenue compared to the other segments.

Overall, these four key segments — lager beer, sorghum beer, sparkling beverages and wines and spirits — contributed a combined 99,97 percent to the total group revenue, up from 99,81 percent in 2023.

The remaining segments experienced a significant decline in revenue, dropping by 76 percent to US$261 000 from US$1,1 million in the prior year.

Mr Moyo indicated the group drove its capital expenditure across all product lines with a cumulative investment over the past two years of about US$100 million, which also helped to stabilise product supply.

“The group commissioned significant production capacity expansion projects during the current year to support volume growth and to improve customer service,” he said.

These include the lager beer glass packaging line at Southerton Brewery, a PET packaging line at Graniteside, the Chibuku Super plant at Harare Brewery and a Chibuku Super plant at Phelindaba Brewery in Pretoria.

AFDIS also commissioned a new PET line, refrigeration equipment and a bottle washer, whilst Schweppes Zimbabwe installed a high-capacity PET line, among other key projects.

Overall, the group’s revenue climbed by 43 percent to US$767,6 million from US$535,8 million in the prior year.

This was primarily attributed to record sales in the lager beer segment and significant growth across other key product lines.

Inflation rate distortions and exchange rate fluctuations also accounted for the revenue growth.

Management accounts have pinned year-on-year topline performance at 10 percent.

Earnings before interest, tax, depreciation and amortisation of US$166,92 million was recorded, with a margin of 22 percent relative to the 21 percent recorded in the prior year.

Finance costs decreased by 48 percent to US$3,54 million.

However, the group swung from an exchange gain of US$29,97 million in the prior year to a loss of US$41,54 million in the current period.

Despite this, Delta closed its financial year with a bottom-line performance of US$100,54 million.

The South African and Zambian segments, however, remained in a loss position for the year.

While the beverages maker has also experienced headwinds, its strategic focus on expanding its market reach and enhancing production efficiency has paid off handsomely, especially for the sorghum beer segment, particularly in foreign territories such as Zambia and South Africa.

Looking ahead, Delta is well-positioned to sustain its growth trajectory, despite the obtaining challenges, particularly inflationary pressures.

The company is likely to continue investing in capacity expansion, product innovation and market development to further strengthen its market leadership.

“The business will benefit from the improved product supply following the commissioning of additional production capacity during the past year and improved operational efficiencies across the business segments.

“The focus remains on exploiting opportunities from activities that generate aggregate demand. Consumer spending remains resilient across the territories and offers growth opportunities,” said Mr Moyo.

Additionally, the economy is also expected to be affected by the impact of the El Niño-induced drought, which research firm IH Securities believes will result in depressed volume performance for the group.

“The current financial year will likely present challenges on weaker consumer liquidity as the impact of the El Niño drought is felt and another mainstay sector — mining — battles falling prices.

“We anticipate a slowdown in volume growth in this regard,” said IH Securities.

Additionally, the recently introduced sugar tax has also seen a US$46 million bump in taxes for the group, putting pressure on profitability.

 

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David Lee Munemo David Lee Munemo is a rising Zimbabwean journalist with a passion for making complex news discoveries accessible to the public. Driven by a belief in the importance of information communication, David's work tackles a variety of news fields, from groundbreaking entertainment research to the latest political news.