Zimbabwe News and Internet Radio

Delta revenue falls as customers battle cash shortages

By Enacy Mapakame

Beverages manufacturer Delta Corporation Limited reported an 11 percent fall in revenue for the first quarter ended 30 June, 2016 on depressed volumes.

Sorghum beer volumes rose 9 percent due to improved availability of Chibuku Super and client’s shift towards more affordable options
Sorghum beer volumes rose 9 percent due to improved availability of Chibuku Super and client’s shift towards more affordable options

In a trading update, Delta attributed the decline to the challenging economic environment characterised by low consumer spending as customers battled cash shortages that have been prevalent in the past few months.

Lager beer was 14 percent lower and sparkling beverages volume was 9 percent below prior year for the quarter.

“The group’s volume and revenue performance was impacted by the marked changes in the trading environment.

“Consumer spending has been affected by the limited access to cash, a poor agriculture season and the generally weak macro-economic performance,” said Delta.

However, sorghum beer volume rose 9 percent for the quarter improved by the availability of Chibuku Super and consumers’ shift towards more affordable options.

“The depressed disposable incomes continue to drive consumers towards value for money brands and packs,” said Delta.

Chibuku Super was introduced onto the market in 2012 and has proven to be a favourite among locals and now accounts for a significant chunk of the company’s volumes.

Equities analysts have also guided Delta’s sorghum segment to push earnings as the beverages giant is expected to commission two Chibuku Super plants in financial year 2017 which will increase capacity in this line by 30 percent.

This will also enhance the availability of the brand which is popular due to affordability compared to others.

“We are optimistic of sustained growth particularly in the sorghum segment. Despite pressure on volumes, Delta continues to churn significant levels of net cash against a lower capex burden which we believe will sustain the company’s dividend policy,” said stockbrokers IH Securities in a research note.

Delta further reported it increased retail price of Maheu to take into account the input tax that is no longer claimable as the product category was changed from zero-rated to exempt status for value added tax purposes.

Like many other local companies, Delta has been recording shrinking earnings on the back of a challenging economic environment.

The company reported a 12 percent decline in profit to $80 million for the year ended 31 March, 2016 reflective of the tough operating environment.

Revenue from continuing operations for the full year was down to $538 million compared to $576 million in the prior year while lager and sorghum beer volumes declined 8 percent and 3 percent respectively as consumer spending remains under pressure.

Its shares yesterday fell 2,33 percent to 68,12 cents on news of revenue declines for the first quarter. The stock has a 52 week high of $1 and a low of 50 cents.

Valued at $847 million, Delta is the largest on the local bourse.