Lager volume recovery spurs on Delta

Conrad Dube

LAGER volume recovery in the third quarter spurred on Delta Corporation to offset a 6% volume decline in lager and sorghum beverages at half-year but was not enough to fend off a 23% knock on the

group’s share price this week.


Analysts said the market reacted to below analysts’ range of forecasts of between $30 and $38 for the final results to March 31 2003.


Delta shares closed at $205, shedding $57 from last Thursday’s closing price as the share could not withstand pressure from speculative investors.


The group’s headline earnings from core businesses increased by 246% to $25,68 per share from $7,41. Analysts said the group could have performed much better considering Delta was a defensive counter and had a history of out-performing market expectations.

An investment analyst said on the back of the fall of the group’s share price the market was not happy with this year’s performance and panic disposals led to the crash.


“Delta made significant profits but the fact that the company’s earnings per share were below the market expectation, investors feared the worst and disposed in panic, but I think the counter was over punished,” she said.


But chief executive officer Joe Mutizwa said the results for the year were “most satisfactory”.


He said: “Given the environment of supplier failure, power cuts, fuel shortages and price controls over carbonated soft drink products for the second half of the year, the results for the year are most satisfactory. Soft drink products have been affected particularly by shortages of sugar, power outages and price controls with the result that the market has been severely undersupplied and, in the last quarter, these products did not make a contribution to profits.”


The group’s exports improved by 276% to $5,2 billion in the year under review but total group turnover rose 231% to $103,7 billion.

Earnings attributable to shareholders at $22,4 billion were 242% up on the comparative period of $6,5 billion.


Lager beer volumes were unchanged during the year under review but contributed 41% to the group’s profits increasing from 36% the previous year.


Sorghum beer and carbonated soft drinks (CSD) volumes were down 12% and 14% respectively forcing profit contribution from the two beverages downwards to 19% from 22% and 6% from 15% respectively.


The group declared a final dividend of 500 cents per share, 85% up on last year’s 270 cents bringing the total dividend for the year to 700 cents (2002:320 cents), 119% increase from last year’s 320 cents per share.


Analysts said Delta shareholders and investors had been accustomed to above the range performance over the years and the below market expectation heralded a new turn forcing some speculators to sell-off.


They said speculative investors sell-off in panic without any market fundamentals.

An investment analyst said: “Fundamentally the results were good especially considering the trimming out of Zimsun, only that investors have been used to above the range performance by Delta. The decision to sell-off the group’s shares was probably augmented by the results but there was no reason to panic as the company has enough input stock and the recent significant price increases in all the three beverages could help volumes to catch up.”

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