DELTA Beverages says it is working on preserving US$350 million excess cash on its books and investing in profitable projects, but will resist the temptation of trading on the parallel market.
In the six months to September 30 2018, Delta was sitting on US$349,621 million up from US$222,7 million in the same period last year.
Delta CE Pearson Gowero told businessdigest on the sidelines of the company’s analyst briefing this week that in the past six months the company had funded all its operations using a formal rate of 1:1 with the Real Time Gross Settlement (RTGS).
He added that the amount of forex that Delta needs was small in relation to its turnover and the company had really no obligation to convert to US dollars.
“All the money we used in the last six months was availed on the basis of 1:1. Per every $10 (in bond notes) we need $1 of hard currency so even if it was not 1:1 it will not see us doubling or tripling our prices because the US$ content of our products is not 100%; it’s a small portion relative to our turnover. So even at some point the rate officially changes, even by 20%, the prices won’t rise by 201% because not all our content is foreign. We are already preserving value by not trading on the black market; not all the money we are holding is chasing foreign currency,” he said.
Gowero said the money could be used to settle its local obligations including wages and local suppliers.
The company’s FD Matlhogonolo Valela said the company was working on ways to see what they can do with the money, but was hampered by the current environment.
“We shall find a way to see what we can do with all that money, but we are still on track. The trading environment is delaying our ambitions as to what we really want to do. We would want a situation where we fulfil our plans for expansion,” he said.
Valela said Delta needed between US$60 million to US$100 million annually to finance its operations.
During the period, earnings per share stood at US4,57 cents compared to US2,63 cents in the same corresponding period in 2017.
Revenue increased 37% to US$341 million. Operating income increased 73% over the prior year driven by a 54% increase in lager beer volumes and a buoyant Chibuku Super contribution in the sorghum beer category.
Sparkling beverages were the worst affected by the inability to access foreign currency for raw materials.
Included in net case of US$302 million is US$53 million in unremitted dividends due to foreign shareholders and overdue foreign creditors of US$41 million.
“Our internal limit as a business is US$50 million of external creditors and when it reaches that level we don’t contract anymore credit. We only uplift material of goods and services to the extent that we are pre-paid,” Gowero said. “We have not gone beyond our limits and we are trying to hold them as they are and ensuring that we prepay for all the input.”