LISTED beverages maker, Delta Corporation, has reported subdued performance for the first quarter ended 30 June 2019.
This has seen lager beer volumes declining by 57 percent while sparkling beverages volumes dropped by 79 percent compared to prior year due to constrained demand and raw material supply related challenges.
In a trading update for the period under review issued yesterday, the corporation said the fundamental changes to the economy arising from the recent fiscal and monetary policy shift had significantly affected the business.
“Lager beer volume declined by 57 percent compared to prior year for the quarter. Demand was subdued on account of affordability issues as market players adopted varied pricing models,” said Delta. “The sparkling beverages volume declined by 79 percent for the quarter.”
It however, said the business has resumed full production following an extended period of shutdown due to shortages of imported raw materials. Delta highlighted that the fundamental macro-economic changes had altered the market dynamics. While acknowledging improvement on foreign currency availability earlier, the beverages giant said the situation has not reached satisfactory levels to guarantee smooth importation of critical raw materials. “The macro-economic changes have led to a surge in inflation and a fast depreciating exchange rate, which have resulted in the erosion of disposable incomes and reduced consumer spending. The availability of foreign currency remains a challenge, disrupting imported supplies into the value chain,” said Delta.
“Our product prices have not yet factored in the full impact of the depreciation of the exchange rate.”
The company said its board noted the Reserve Bank of Zimbabwe’s policy to ring-fence the legacy foreign liabilities for settlement at the one to one exchange rate. It however, said foreign suppliers remain cautious about Zimbabwe’s country risk, thus compromising the smooth flow of imported materials.
On the sorghum beer volumes, Delta said the unit in Zimbabwe grew by two percent versus prior year for the quarter, adding that product supply has been consistent despite the difficulties in accessing imported packaging materials and services.
The company has expressed concern about the supply of agricultural cereals arising from drought and the recent changes to the marketing policies. Delta said its National Breweries Plc unit (Natbrew) in Zambia recorded positive gains in volumes following the introduction of a returnable pack and an enhanced product formulation.
African Distillers (Afdis) are due to report their full year results to 30 June 2019. Delta said the group revenue, which includes Afdis, would reflect an increase of 92 percent for the quarter, noting that the comparative prior year figures were reported in US dollars.
Meanwhile, Delta reminded shareholders that the company was trading under a cautionary issued with respect to the notice received from The Coca-Cola Company (TCCC) advising of an intention to terminate the Bottler’s Agreements with the group entities (Notified Intention).
This followed the merger of AB InBev and SABMiller Plc in October 2016 and the subsequent agreement in principle reached between TCCC and AB InBev to explore options to restructure the bottling operations in a number of countries.
“The ongoing discussions amongst the parties are slower than anticipated in light of the significant changes to the macro-economic factors in Zimbabwe,” it said.