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Delta’s growth depends on post-election environment

Delta Corporation volumes growth will be dependent on Gross Domestic Product and the socio- economic environment of the post general elections, a company official said.

Fidelity Mhlanga

Delta Corporation CEO Pearson Gowero said the total revenue for the first quarter to June was up 8% from US$142 million in the same period in the prior financial year to US$153 million buoyed by premium lager brands.

He added that his company was targeting to spend between 30 to 50% of Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) in capex in the current financial year to the business.

In the same quarter, lager beer volumes fell 8%, while sorghum grew by 6%. Soft drinks volumes grew by 13 %, while Maheu volumes surged 80%, a figure Gowero said was largely because the business unit was coming off a low base.

Gowero attributed the depressed lager demand to a 5% excise duty hike by government in November last year to 45%.

“When the excise duty goes up,we also adjust our lager prices. When rates go up much faster than the market can absorb, both those selling products and revenue collectors will end up as losers,” Gowero said.

He said business was operating against the backdrop of an uneven consumer demand, tight liquidity conditions, under performance of agriculture with consumers feeling the pinch of economic hardships.

He said there was uneven consumer demand for Delta products across provinces with Masvingo, Mashonaland East and Midlands being vehicles of growth while Manicaland, part of Mashonaland West and Matabeleland provinces were underperforming.

“Our investment has been characterised by uneven consumer demand. When we analyse our investment,Masvingo,Mashonaland east, Midlands show they are vehicles of growth.Manicaland,Matabelaland provinces and part of Mashonaland west are not perfoming well. Manicaland province is a big question mark—we are not getting the revenue that we expect ,” Gowero said.

Chibuku volume grew 6% buoyed by the launch of the Chibuku Super, which Gowero said had good margins.

He said while the Chibuku Super margings had not yet begun to eat into the Chibuku margins, he expected a trade-off later. Gowero also said engineers were scoping the Chibuku Super plant with a view of doubling capacity.

Soft drinks volume growth was driven by improved Poly ethylene terephthalate supply position following the commissioning of a new line in Bulawayo, while Maheu was growing strongly due to consumer acceptance and use of the company’s extensive distribution network.

At Schweppes, Minute Maid drinks made significant contribution to the business.

FDIS was currently embarking on recapitalisation exercise to improve productivity and profitability.

Schweppes Zimbabwe Limited has been subject to environmental challenges and price competition particularly in cordials, he said.
While the group looks forward to a positive earnings growth, management said this would be reflective of both cost efficiency and product mix.

Delta beverages revenue grew by 14% last year as a result of an improved sales mix and minimal price increases.

Earnings before interest and tax grew by 37% leveraged by improved productivity and process efficiencies.

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