Delta to invest $30m in two Chibuku plants

Delta Corporation, Zimbabwe Stock Exchange’s largest company by market capitalisation, will invest $30 million in two additional Chibuku Super plants which, according to chief executive Pearson Gowero is where the future lies.

This comes after the group has experienced a shift by consumers towards affordable brands such as Chibuku as part of efforts to stretch the elusive dollar.

Mr Gowero told analysts on Wednesday that Delta would deploy $30 million towards increasing Chibuku Super capacity through two new plants which will be commissioned in Masvingo and Kwekwe by September.

“The trend has shown that this is the growth area which will drive volume and profitability in light of declining performance across other categories,” said Mr Gowero.

For the group, the strategy on the sorghum beer category, which Chibuku falls under, was two pronged.

Firstly to reduce the contribution of the standard Chibuku “which is a fickle product with little shelf life” and secondly to increase capacity on Chibuku Super where “the future lies.”

Mr Gowero said: “Going forward, we will use the standard Chibuku facilities to build capacity for Super.”

In the year to March, sorghum beer volume declined 3 percent to 3,5 million hectoliters. The group said favourable pricing of standard Chibuku and improved availability of Chibuku Super helped to uplift both demand and spend in the second half of the year.

Lager beer volume fell 8 percent. The value brands grew, the premium portfolio softened while the mainstream brands experienced the most decline.

Sparkling beverages was down 6 percent and alternative beverages declined 2 percent.

Mr Gowero said sales performance had been hampered partly by increased parallel imports, competition from other forms of alcohol as well as falling disposable incomes.

Sales performance was also hampered by restrained credit cycle as key distributors of the brewer’s products faced challenges in the tight liquidity environment.

In the period, operating income declined 14 percent to $96,1 million while EBITDA was down 10 percent, which is a reflection of overhead cost control.

Net profit was $80 million for the year ended March 31, 2016, from $93 million last year.

Normal earnings per share were at 6,49 cents the group declared a total dividend of 4,70 cents per share, which included a special dividend of 0,95 cents per share.