Water shortages threaten Delta operations

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Delta, the largest company on the ZSE by market capitalisation, last month recorded a 12% decline in annual profit.

BEVERAGE-MAKER Delta Corporation says water supply shortages besetting the country could cripple its operations as demand for its products declines due to a weakening economy.

By Fidelity Mhlanga

In a statement accompanying its financial results, the company’s chairman Canaan Dube said the erratic water shortages would hit the business going forward.

“There is emerging risk on water supply due to depleted dam and ground water sources.This may lead to disruptions to production,” he said.

Due to the AB inBev and SABMiller merger, Delta was last month notifi¬ed by The Coca-Cola Company (TCCC) of its intention to terminate the bottlers’ agreement with Delta Beverages and its associate Schweppes Holdings Africa Limited.

World’s top brewer, AB Inbev, is a bottler of Pepsi products and this could have led TCCC to terminate its bottlers’ agreement with Delta Corporation, as there is an obvious conflict of interest.

Before the merger SABMiller held a 40% stake in Delta.

Delta’s FD Mathlogonolo Valela told an analyst briefing on Wednesday that discussions pertaining the termination of the Coca Cola franchise were supposed to respect shareholder value.

“Our worst case scenario will be value destruction and our strategy is to negotiate whatever way possible. Whatever solution we come up with must protect shareholder value,” Valela said.

He said the AB inBev executives were in the country last Friday with the visit being the second in Africa, signalling the importance of the market.

Delta’s profit after tax for the six month period ending September 2016 was US$30,9 million, down from US$35,7 million.

Revenue decreased by 8% to US$246,6 million with operating income going down by 9% to US$54,9 million.

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