A cross-section of Delta, ZSE blue-chip

BY EBEN MABUNDA

DELTA Corporation controls over 50% of the non-alcoholic beverages market in Zimbabwe and approximately 80% of the alcoholic beverages market through its own operations and those of its subsidiaries and associates.

The significance of Delta’s performance is that the company produces essential products in the food sector and also controls a bigger fraction of the market. The entity is also involved in downstream and upstream value chains, which impacts agriculture, packaging and transport sectors among others. It is thus seen as a major player in the economy and its performance often touted as an economic barometer for Zimbabwe.

Delta raised an alarm on exchange rate disparities, which prevailed over its most recent financial year. Thus, “the entity does not believe that the official exchange rates prevailing during the financial year were, at all times, fairly reflective of the currency exchangeability”.

The group also highlighted lack of accessibility to the Foreign Exchange Auction Trading System due to “rules relating thereto”.

Delta posted a resilient set of financial results despite Covid-19’s bite on business and a harsh macro-economic environ in Zimbabwe and Zambia, where it owns the National Breweries (Natbrew). The group’s inflation-adjusted revenue jumped 39% to ZW$40,4 billion (US$475 million) for the year ended March 31, 2021 against the prior year’s ZW$29 billion (US$341,1 million), while its bottom line came in at ZW$6,4 billion (US$75,3 million), 74% ahead of ZW$3,7 billion (US$43,5 million) in the previous year. The group has legacy foreign liabilities of US$18,8 million, being those amounts that were due and payable on February 22, 2019 when the authorities promulgated SI33/19 which introduced the ZW$ currency, as distinct from the US$, as the functional currency. In 2020, the group completed the acquisition of  United National Breweries (South Africa), a manufacturer of Traditional African Sorghum Beer in South Africa and the owners of the “Chibuku” brand for a consideration of ZAR636 million.

Notably, Delta’s volume performance has largely been anchored on sorghum beer owing to the nature of the offering. Sorghum beer is typically a high volume and low margin product. A few years into dollarisation, Delta ramped up production capacity in the sorghum beer line while adding new packs to the line too, particularly Chibuku Super.

At a point when the economy began experiencing a slowdown notably in 2017 onwards, Sorghum beer volumes started to re-trend northward and even set new record highs in 2018. At this point consumers were foregoing mainstream offering such as lager beer and trading down to value products.

Meanwhile, Delta recently consolidated its position in the soft drink market, following the successful acquisition of Manicaland Bottling Company (MBC), signaling a successful expansion of the Coca-Cola Franchise into Manicaland.

This came as Delta pushed to recover its market share after the entrance of the Pepsi producing Varun beverages. Remarkably, AB InBev- the owners of the Pepsi brand; hold a 40% stake in Delta. It has investments in associate companies whose activities are in cordials and juice drinks, wines and spirits. Delta Corporation owns 21,4% of Nampak Zimbabwe, 50,1% of African Distillers (AFDIS) and 49% of Schweppes.

Founded in 1898 Cameroon Street, (Salisbury) Harare, Delta was listed in 1946 as Rhodesia Breweries Limited. Over the decades the firm diversified its investments across the industrial, retailing and hospitality sectors, eventually spinning-off African Sun and OK Zimbabwe which are listed on the local bourse.

Known for its clear succession plan, Delta saw a change of guard earlier this year with the appointment of a new CEO Mathlogonolo Valela, following the retirement of Pearson Gowero. Valela assumes captaincy on July 1, 2021, having been the financial director since July 2011. The position of finance director will now be held by Alex Makamure who had been Company Secretary.

With a current share-price of ZWL7 011 cents, Delta has a ZW$87 billion (US$1,02 billion) market cap. The stock has surged 198% this year versus the ZSE All Share Index, which mounted 123% to date.

Mabunda is an analyst and TV anchor at Equity Axis, a leading financial research firm in Zimbabwe. — ebenm@equityaxis