Delta Corporation reported a buoyant Christmas quarter with the key lager beer volumes rising 48% against the comparable year ago period, due to positives arising from the payment of end of year bonuses and increased mining activity and infrastructure projects which injected liquidity onto the market. This comes in a year characterised by slowdown in economic activity due to a pandemic and associated lockdowns.
With the end of year comes an increase in social functions, holiday parties and dinners out, which inevitably leads to more alcohol consumption for most adults.
For the nine months to December volumes were up 20% impacted mainly by the lockdown in the first half.
According to a trading update from the company, the volume recovery is due to competitive pricing and consistent product supply. This was after the company had benefited from the injection of new returnable glass and fewer disruptions to production operations.
“The improved access to foreign currency has resulted in stable pricing and consistent product supply due to better access to imported raw materials and spares.”
Sparkling beverages volume grew by 66% for the quarter and is up 42% for the nine months compared to prior year. The category benefited from consistent product supply and competitive pricing. The sales mix has shifted towards take-home packs in response to the restrictions on gatherings.
The company is awaiting regulatory approvals of the proposed extension of the sparkling beverages franchise territory to Manicaland in this quarter.
Sorghum beer volume in Zimbabwe grew 29% for the quarter but still trailed prior year by 14% for the nine months due to limited access to trade channels such as bottle stores and rural markets in the first half of the year. . There was improved market access following the relaxation of the lockdown measures during the quarter.
The volume at Natbrew Zambia declined by 2% for the quarter and is up 5% for the nine months. The category has witnessed the resurgence of illegal trading in bulk beer which trades at a discount to packaged products.
The South African entity, United National Breweries recorded a year on year decline of 19% for the quarter as South Africa has implemented very strict restrictions and bans on the sale and consumption of alcohol. The total ban on alcohol sales was re-imposed at the end of December 2020.
Afdis registered volume growth of 37% for the quarter and 25% for the nine months driven by the spirits and ready to drink ciders. Schweppes Holdings recovered and registered growth of 24% for the quarter but is down 2% for the nine months. The recovery is premised on improved product supply and the relaunch of the Minute Maid range of juice drinks.
Financial performance was above inflation with revenue growing 784% and 837% in historical cost terms for the quarter and nine months respectively. In hyperinflation terms, revenue grew 77% for the quarter and 33% for the year to date.
Delta said it has benefited from the improved access to foreign currency through domestic Nostro sales. Foreign currency sales are totalling US$15 million – US$20 million per month against import requirements of US$2 million per month excluding capex. The foreign currency is being prioritised towards settlement of the legacy debts in line with the arrangements with the Reserve Bank of Zimbabwe.
Steady progress has also been made in the settlement of the loan for the acquisition of UNB (SA) which stands at about R250 million.
Looking ahead, the company said the business outturn for the fourth quarter will be subdued because of the stringent lockdowns across the region although the Zimbabwean economy could benefit from improved access to foreign currency and lower inflation.
Delta currently has a YTD gain of 16.29% on the Zimbabwe Stock Exchange and is likely to remain at the centre of trading activity. The main concerns around foreign currency liabilities are gradually being reduced with Company Secretary Alex Makamure telling FinX that the gross debt is about US$30 million and net at US$20 million after prepayments to same creditors for new supplies.
More positive for the group is that its product mix has shown to be responsive and adaptive to operational challenges.
Source – finx