Forex shortages cripple Delta
Delta Corporation says acute foreign currency shortages in the country have led to disruptions in business operations, leading to a 66 percent decrease in soft drinks volumes during its strongest period that covers Christmas.
In its latest trading update, the Zimbabwe Stock Exchange (ZSE) largest company by market capitalisation said it is concerned about its ability to meet its foreign currency obligations.
“The acute shortage of foreign currency led to disruptions to business operations particularly the soft drinks business.
“The board is concerned about the company’s ability to meet its foreign currency obligations and access to imported raw materials.
“It is hoped that the ongoing engagements with key stakeholders will result in improved access to foreign currency,” company secretary Alex Makamure said.
The sparkling beverages volume declined 66 percent during the third quarter of the year from the 26 percent reported during the previous comparable period.
“There were extended production stoppages arising from limited access to foreign currency required for importing key raw materials and failure to clear arrear payments to The Coca Cola Company (TCCC),” Makamure said.
Lager beer volume increased by 27 percent during the third quarter and was up 43 percent for the nine months.
The Sorghum beer volume in Zimbabwe increased 15 percent during the review quarter while for the nine months it grew by six percent.
Makamure noted that Chibuku Super contributed 85 percent to the volume increase.
“There were supply gaps due to frictional shortages of packaging materials and extended plant breakdowns mostly occasioned by lack of foreign currency for spares and contractual services,” he said.
National Breweries Plc Zambia reported a four percent increase in volume growth for the quarter and a nine percent increase for the nine months.
The group’s revenue increased by five percent during the review period.
During the nine months group revenue was up 24 percent reflecting the growth in the beer business which was weighed down by depressed outturn in soft drinks.
Recently, Delta resorted to price hikes after its attempt to charge for its products in US dollars was rejected by authorities.
By end of September 2018, Delta owed its suppliers approximately $41 million, while its major shareholder AB InBev was owed more than $53 million in unrepatriated dividends.
Makamure said the company is still in discussions with TCCC, as they are still trading under a cautionary after the latter had advised to terminate the bottler’s agreements with the group entities.
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 is set to acquire a 100 percent stake at South African sorghum beer business United National Breweries after reaching an agreement with owners Diego South Africa Proprietary Limited.
The deal is expected to be concluded in the first half of the year and will bring Delta’s regional acquisitions to two.
The Zimbabwean traditional beer brewer recently bought National Breweries in Zambia as it seeks to diversify its operations into the region. Daily News.