Delta half-year earnings down 20%

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ZIMBABWE Stock Exchange (ZSE) heavyweight Delta Corporation has posted a 20,6% decline in after tax profit to US$35,7 million owing to weakening sales on the back of an underperforming economy.

Unprecedented company closures and subsequent job losses have weakened the country’s consumer spending, resulting in Delta’s volumes sagging. At US$269 million, revenues were down 8%. The company attributed this to changes in the portfolio mix, volume declines and price cuts.

In September Delta, the local unit of South Africa’s SABMiller, lowered lager beer prices by up to 11% to drive volumes ahead of the festive season, bringing total price cuts to 20% since the start of the year.

“The trading environment remains difficult due to pressure on discretionary spending and the resultant depressed consumer demand,” company chairman Canaan Dube said in a statement accompanying the financials.

“Of particular note is the impact of the escalation of job losses, wage and salary cuts, delayed wage payments and uncertainties over pay dates. The country continues to lose competitiveness due to delays in implementing policies that would encourage correction of price distortions in the face of weakening regional currencies.”

Sparkling beverage volumes were down 15% on the prior year, while sorghum beer also recorded a volume decline of 12% for the six months.

“Operating income is down 20% largely due to the loss of financial leverage arising from the volume and revenue losses,” Dube said.

Delta, at market capitalisation of just over US$1 billion, accounts for nearly a third of the ZSE market capitalisation.

In response to the sagging demand, Delta Beverages in its latest cut in September announced that it had reduced mainstream beer prices across the pint (375ml) and the quart (750ml) packs for mainstream brands Castle Lager, Lion Lager and Carling Black Label with effect from October 1.

The price of the popular pint and quart packs was reduced from US$0,90 to US$0,80; and US$1,55 to US$1,50 respectively.-Bernard Mpofu

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