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. Herald
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