12 October 2017

Zimbabwe: Delta Lager Volumes Recover

Delta Corporation lager volumes continued to show recovery for the second consecutive quarter spurred largely by improved disposable incomes in the agriculture and small scale mining sectors. In a trading update for the September quarter, Delta said lager beer volumes jumped 11 percent for the quarter and half year to September 2017, driven by value packs and brands benefiting from improved income from mining and agriculture. However, performance in the period under review was characterised by mixed results across segments, impacted by transaction challenges largely dominated by electronic payments in the wake of worsening cash shortages in the country.

"Lager beer volume grew 11 percent above prior year for both the quarter and the six months with a mix in favour of value packs and brands benefiting from improved disposable incomes driven by agriculture and small scale mining," company secretary Alex Makamure said in the update. In the first quarter to June 30, lager volumes rose 12 percent. Sparkling beverages volume declined by 1 percent for the quarter and closed flat on prior year for the six months, while Maheu volumes went up 12 percent and 19 percent for the quarter and six months, respectively. Sorghum beer volume was 3 percent down on prior year for the quarter and 4 percent down for the six months. The category was largely impacted by transactional challenges in the rural areas and also the trading up to lager beer in some markets.

"Group revenue increased by 1 percent for the quarter and is up 2 percent for the six months," Mr Makamure said. Delta also said it had declared an Interim dividend number 117, of $2,25 cents per share payable in respect of all the qualifying ordinary shares of the company to be paid out of the profits for the current financial year. This will be payable to shareholders registered at the close of business on 27 October 2017.

Meanwhile, Delta said it was still trading under a cautionary issued with respect to the notice received from The Coca-Cola Company (TCCC) advising of an intention to terminate the Bottler's Agreements with the Group entities (Notified Intention). This followed the merger of AB InBev and SABMiller Plc in October 2016 and the subsequent agreement in principle reached between TCCC and AB InBev to explore options to restructure the bottling operations in a number of countries. Delta said the discussions have progressed slower than anticipated.

Delta's results for the full year to March 2017 showed that total revenue for the period was down 10 percent following a 6 percent decline in volumes. Segment by segment, lager beer revenue was down 8 percent while volumes were down 7 percent. Sorghum beer revenue was down 6 percent following a 3 percent drop in revenue. Soft Drinks were the worst performer with revenue falling by 15 percent after volumes tumbled by 11 percent. Earnings before interest and tax were down by 15 percent at $82 million. EBITDA declined by 13 percent to $112,8 million while attributable income declined by 13 percent to $69,9 million. The poor performance was attributed fall in aggregate demand and late rains, which affected market access and outdoor consumption occasions. Delta also reported that the shortage of bank notes and the limited availability of alternative payment platforms had impacted negatively on demand.

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