Delta expects massive share price growth

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ZIMBABWE’S largest beverage manufacturer Delta Corporation (Delta) is expecting a massive share price growth in the full trading year to March 2014 buoyed by solid investments made in plant and equipment, a top company official said.

Report by Taurai Mangudhla

CEO Pearson Gowero told an Imara Zimbabwe conference this week in Harare that Delta’s share price was on an upward growth trajectory as the group continues to reap benefits from its massive capital investments made since the country adopted a multiple currency regime in 2009.

He said the group, which was very bullish ahead of the upcoming elections, was also targeting to grow dividends going forward.
“Our target is to improve total shareholder return as measured by revenue growth, margins and cash,” he said.

While a lot of companies are fretting over Zimbabwe’s polls slated for this year, Delta says elections bring good business for the company.

“We have had eight elections over the past 10 years and all these instances consumption has grown and so we remain optimistic,” Gowero said.

Delta FD Matts Valela said the group was also looking at growing its business from the opportunities coming from growth in mining and agriculture.

“We are looking at mines, both small scale and large scale where you find a single mine employing 2 000 or 3 000 people as well as agriculture with the increase in tobacco farming,” Valela said.
“We also have the tourism sector which is technically dead for now. We would be very pleased if it grows because every single tourist that comes into the country consumes a litre of beer.”
Gowero said the company’s long term plan was to allocate between 15 and 20% of Earnings Before Interest, Taxes, Depreciation, and Amortisation (Ebitda) as capital expenditure (capex) after having successfully modernised most of the group’s production and packaging plants.

He said Delta spent US$85 million last year which was 50% of Ebitda and is targeting to spend 30% of Ebitda as capex in the current financial year.

Delta has plans to invest in a new Maheu plant expected to at least double production to meet growing demand for the product, Gowero said.

In the previous full year, Delta said Maheu volumes grew 42% on prior year benefiting from the shift from importation to local production.
Giving a history of the group’s share price, Gowero said it closed 2009 at US40,15 cents per share before growing to US47,5 and US70 cents per share in 2010 and 2011 respectively.

The share price slid slightly at the end of 2013 to US68 cents per share before rebounding to US115c per share as at group’s recent full financial year end of March 31, 2013.

Although Gowero said he saw the company’s share price growing 27% to around US$1,56 per share by the end of the current full financial year to March 2014, the share on Wednesday’s close traded at US151,04 cents, suggesting that Govero may have been extremely conservative in his estimates or that investors have already fully priced in the company’s expected performance according to his predictions.

The growth in share price is expected to be coupled with a growth in production volumes. Gowero said the company was currently 800 000 hectoliters(hl) short of peak volumes of 2,4million hl.

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