1 August 2014

Zimbabwe: Delta Bemoans Liquidity Crisis

ZIMBABWE'S largest beverage manufacturer Delta Corporation says volumes for larger beer and sparkling beverages have been depressed in the last quarter ended June 2014 due to macroeconomic challenges that have affected demand.

This comes as the company reported a 21% slump in larger volumes in the last quarter ended June 31, 2014 compared to the same period last year while gross revenues went down 3% compared to the previous corresponding period.

Group CEO Pearson Gowero told the company's annual general meeting on Wednesday the economy is currently suffering from deflation, price corrections, retrenchments with companies, including the civil service, failing to meet payroll obligations.

He said volumes for larger and soft drinks are seen reflecting weak economic fundamentals.

"People do not know when their next pay comes so if they do not know they simply don't spend," Gowero said.

The Delta CEO said consumers are as a result of macroeconomic constraints seeking real value for their money hence their focus on basic necessities.

"People are living from hand to mouth and any attempts we have made to reduce the cost of goods has resulted in people saving rather than buying more of those goods, "he added.

Despite the 21% fall in larger volumes, total volumes went up 1% in the period under review mainly driven by a growth in sorghum beer and alternative beverages.

Sorghum beer registered a 15% growth spurred by the carbonated long life sorghum brand Chibuku Super.

"The Chibuku Super has performed very well and its margins are much higher," Gowero said.

Gowero said capital expenditure will be between 30 and 50% of earnings before interest, taxes, depreciation, and amortization going forward, with indications investment could be channeled towards additional capacity in the sorghum beer division.

"With Chibuku Super, we are selling everything that we are producing so we may need additional capacity, but the cost is much less than investing in largers."

Alternative beverages registered a 22% growth in volumes mainly driven by maheu with uptake of the new diary mixes and yogurt satisfactory, according to management.

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