Listed brewer, Delta Corporation Limited (Delta) says its production and distribution operations were disturbed by the dearth of electricity, fuel and foreign currency.
BY MISHMA CHAKANYUKA
Delta is the largest company listed on the Zimbabwe Stock Exchange in terms of market capitalisation.
“Our production and distribution operations were disrupted by the shortages of electricity and fuel, which in themselves are a manifestation of the limited availability of foreign currency. The sourcing of imported goods and services remains constrained by the shortages of foreign currency, particularly in view of the backlog in settling past due obligations,” said Delta chairman, Canaan Dube in a statement accompanying the group’s financial results for the period ended September 30, 2019.
“Zimbabwe shifted from the multi-currency trading and reverted to the Zimbabwe Dollar (ZWL) as the sole trading currency at the end of June 2019. The policy changes have led to a surge in inflation and a fast depreciating exchange rate. Consumer spending remains low as incomes have lagged the escalation in prices of goods and services.”
Dube added: “The company has been adversely impacted by shortages of potable water, electricity and fuel. Volume performance is thus constrained and significantly below last year across our product offering”.
As such, Delta’s lager beer volumes declined 48% compared to the same period last year, sorghum beer volumes declined 15% while sparkling beverages volumes were down 56%.
The volume performance at the National Breweries PLC in Zambia, where Delta owns a controlling stake, was also down 20% for the period.
“Volume was 20% down on last year which is partly due to higher pricing on the back of a steep increase in maize prices and the depreciation of the Kwacha. Consumer acceptance of the recently launched returnable pack has been encouraging,” Dube said.
“Product supply is constrained by capacity and power supply disruptions. Chibuku Super and Shake Shake were the dominant packs.”
The performance of the local African Distillers where Delta has a 50,1% stake was also down 41%, due to limitations in accessing and the high cost of foreign currency.
These decreased volumes saw Delta register a 2% decline in total revenue to $1,53 billion in the period under review from a 2018 comparative of $1,57 billion.
Despite the decline in volumes, Delta registered earnings before interest and tax of ZWL$464 million during the period which was 53% above prior year driven by replacement cost pricing in response to inflationary pressures.
This saw profit after tax increasing by about 45% to $382,42 million for the period under review from a comparative 2018 figure of $262,93. Also adding to this was the group earning an additional $731,66 million in other comprehensive income for the period under review.
Earnings per share rose 35% to 28,69 cents during the period under review from 21,30 cents over a similar period in 2018.
Assets grew 25% to $4,68 billion in the period under review from a 2018 comparative of $3,75 billion. This was largely due to the company rebasing its assets in Zimbabwe dollars.
“The implied average fair market exchange rate for the period of ZWL10 to US$1 has been applied to uplift the values of its property, plant and equipment and other long-term assets while foreign liabilities are recorded at the closing exchange rate,” Dube said.
Going forward, the company will manage the emerging risks while striving to capture all available opportunities.