Delta battles policy changes and currency instability in Zimbabwe

HARARE – Delta Corporation Limited, one of Zimbabwe’s largest beverage manufacturers, has reported a mixed trading performance for the third quarter ended 31 December 2024, citing policy changes and currency instability as major challenges.

According to a trading update released by the company, the operating environment in Zimbabwe remains complex, with policy changes and currency instability affecting the beverages sector.

“The operating environment in Zimbabwe remains complex, influenced by policy changes. and currency instability,” the company said.

“The beverages sector faces further challenges relating to uncompetitive retail prices arising from high input costs and taxes which attract lower priced imports from the region and policy driven changes to the route to market.

“The implementation of policies that promote the stability of the local currency and access to foreign currency through formal banking channels would improve the operating environment.”

Delta Corporation, the largest company on the Zimbabwe Stock Exchange, reported a 1% increase in revenue for the quarter compared to prior year, driven by a combination of volume growth and price increases.

However, the company’s operating margins remain under pressure due to high input costs, taxes, and currency fluctuations.

The company’s lager beer volume grew by 4% over prior year for the quarter, while sorghum beer volume declined by 8% due to the cessation of exports and disruptions in the supply chain.

Sparkling beverages volume declined by 16% compared to prior year for the quarter, attributed to the impact of sugar tax-induced price increases and the surge in imports from the region.

Delta reported that Schweppes Holdings Africa Limited recorded a volume decline of 27% for the quarter and 17% for the nine months, primarily due to significant price increases, driven by the sugar tax.

“This resulted in a surge in imports of the flagship Mazoe Orange Crush from regional markets. Volume was also impacted by disruptions in the route to market arising from the fiscal regulations.

“The reduction in the sugar tax from January 2025 is a welcome development although there are significant cost pressures such as the rising juicing fruit and sugar prices which limit the opportunity to moderate retail prices,” the Group stated.

At Nampak Zimbabwe, another subsidiary of Delta, the overall volume for the quarter to December 2024 was 25% below prior year impacted by the lower 2024 tobacco crop and the production stoppages arising from power cuts, plant breakdowns and increased competition in some segments.

Nampak Zimbabwe is trading under a cautionary notice regarding the pending sale of the Nampak International shareholding to TSL Limited for US$25 million.

Delta Corporation also reported that it is contesting tax assessments issued by the Zimbabwe Revenue Authority (ZIMRA) for amounts that they consider to have been payable exclusively in foreign currency.

The disputed amount totals US$73 million, covering principal tax, penalties, and interest for value-added tax and income tax for periods 2019 to 2022.

Despite the challenges, Delta Corporation remains optimistic about its future prospects, citing increased consumer spending and opportunities for growth. The company is focusing on leveraging activities that generate aggregate demand and positioning the business for future growth.

In addition to its core business operations, Delta Corporation is also advancing its sustainability agenda, with increased activities in the areas of responsible alcohol consumption, reduction in waste and pollution, community involvement, and optimizing resource utilisation.