HomeBusiness DigestDelta to spend US$60m in capex

Delta to spend US$60m in capex

ZIMBABWE Stock Exchange- listed beverage manufacturer Delta Corporation (Delta) plans to spend between US$50 and US$60 million in capital projects that will see the company acquire new plant and equipment to increase existing production capacity.

Taurai Mangudhla

Delta FD Matts Valela told businessdigest at the company’s analysts and media briefing for the year ended March 31 2014 that part of the capital expenditure will be used to facelift the group’s Bulawayo brewery.

“We are going to have a new Chibuku Super plant and we are going to re-equip the Bulawayo brewery,” Valela said.

“We are also going to automate the PET (Polyethylene terephthalate) plant in Harare, you know the whole line.”

In the period under review, Delta spent US$67,7 million on capital projects, down from US$83,3 million the previous year.

Valela said the group’s plans to install a new Chibuku Super plant was driven by growing demand for the carbonated sorghum beer which is packed in PET bottles and has a longer shelf life.

Since the product was launched in the first half of 2013, the group has installed two additional plants.

“The cost of installing the new Chibuku Super plant depends on whether you are in place where there is existing infrastructure or not, but it is certainly below US$50 million,” he said.

In July last year Delta’s sorghum beer division — Chibuku — announced plans to invest more than US$6,5 million in a new plant in the current year to meet growing demand for the product, management said.

At the time, Chibuku general manager Mark Mudimbu said capacity was short of market demand after registering more than 60% capacity utilisation in the first three months of operation.

Mudimbu said the plant would contribute at least US$10 million to annual revenue.

Investment towards a new Chibuku plant comes as sorghum beer volumes are picking up while larger beer and sparkling beverages volumes dipped in the second half of the reporting period as consumer spending slowed down due to liquidity challenges.

The group’s results show lager beer volumes declined by 18% to 1,7 million hectolitres while sparkling beverages volumes slid by 2% to 1,6 million hectolitres in the year under review.

Sorghum beer volumes grew 12% to 3,4 million hectolitrs while alternative beverages like the Shumba Maheu and new dairy mix volumes also grew by 33%. Total volumes for the period grew by 0,25% to 6,9 million hectoliters.

Delta CEO Pearson Gowero said economic fundamentals worsened and saw consumers switching to affordable offerings while beer pricing remains an issue.

In terms of sales, lager sales slid 10% to US$316 million while sparkling beverages sales slid 2% to US$225 million, contributing to an overall 1% slump in total revenues which stood at US$625,5 million. Chibuku sales stood at 146 million, 24% up from prior year.

Despite the revenue dip, total comprehensive income for the period was US$107,22 million up from US$104,1 million reported in the previous year.

Schweppes Zimbabwe volumes grew on last year, resulting in a 6% rise in revenues to US$100 million. However, the group said the cordials unit had problems with its distribution channel which is currently being reviewed by management to improve margins.

African Distillers also registered growth in volumes and profitability, Delta said.

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