The Sunday News
Judith Phiri, Sunday News Reporter
LEADING beverages producer, Delta Corporation Group’s revenue grew by 77 percent for the quarter and 33 percent for the year to date in inflation adjusted terms and by 784 percent and 837 percent in historical cost terms for the quarter and year to date respectively.
In a trading update for the third quarter and nine months to 31 December 2020, Delta Corporation company secretary Mr Alex Makamure said the financial performance reflects the significant volume recovery across all beverage categories.
“Group revenue grew by 77 percent for the quarter and 33 percent for the year to date in inflation adjusted terms and by 784 percent and 837 percent in historical cost terms for the quarter and year to date respectively. This reflects the significant volume recovery across all beverage categories and attention to replacement cost-based pricing,” said Mr Makamure.
He added that the Group benefited from the improved access to foreign currency through domestic nostro sales and the foreign currency is being prioritised towards settlement of the legacy debts in line with the arrangements with the Reserve Bank of Zimbabwe. Also, steady progress had been made in the settlement of the loan for the acquisition of UNB (SA).
On the volume performance, Mr Makamure added: “Lager beer volume grew 48 percent for the quarter and 20 percent for the nine months compared to the same period last year (2019). The volume recovery is attributed to the competitive pricing and consistent product supply, benefiting from the injection of new returnable glass and fewer disruptions to production operations.”
He also noted that with on-premise consumption curtailed, there were ongoing efforts to promote at-home consumption in line with the Covid-19 guidelines.
Mr Makamure also said that in Zimbabwe the sorghum beer volume grew 29 percent for the quarter but still trailed prior year by 14 percent for the nine months.
He said there was improved market access following the relaxation of the lockdown measures during the quarter.
However, the sorghum beer category was negatively impacted by limited access to trade channels such as bottle stores and rural markets in the first half of the year.
“The volume at Natbrew Zambia declined by 2 percent for the quarter and is up 5 percent for the nine months. The category has witnessed the resurgence of illegal trading in bulk beer which trades at a discount to packaged product,” added Mr Makamure.
Trading update also highlighted that the South African entity, United National Breweries recorded a year-on-year decline of 19 percent for the quarter as South Africa had implemented very strict restrictions and bans on the sale and consumption of alcohol. The total ban on alcohol sales was re-imposed at the end of December 2020.
For sparkling beverages, Mr Makamure said: “Volume grew by 66 percent for the quarter and was up 42 percent for the nine months compared to the prior year. The category has benefited from consistent product supply and competitive pricing. The sales mix has shifted towards take-home packs in response to the restrictions on gatherings.”
Part of the trading update stated that African Distillers (Afdis) registered volume growth of 37 percent for the quarter and 25 percent for the nine months driven by the spirits and ready to drink ciders.
While, the beverages volume at Schweppes Holdings recovered and registered growth of 24 percent for the quarter but was down 2 percent for the nine months. The recovery was premised on improved product supply and the relaunch of the Minute Maid range of juice drinks.
Mr Makamure further stated that for business update for the third quarter ended 31 December 2020 under the operating environment, the trading environment during the period under review was largely influenced by the restrictions to human and economic activity implemented by authorities in response to the Covid-19 pandemic.
He said in Zimbabwe, Zambia and South Africa, the lockdown measures were partially eased during the quarter to 31 December 2020, allowing for increased business activity albeit with some restrictions on social gatherings and targeted measures limiting the sale or consumption of alcoholic beverages.
He added: “The Covid-19 infections rose sharply towards the end of December 2020 leading to the tightening of the restrictions across the region. The Zimbabwe economy benefited from the stability on the foreign currency auction system and liberalisation on the use of foreign currencies for domestic sales under Statutory Instrument 185 of 2020. The improved access to foreign currency has resulted in stable pricing and consistent product supply due to better access to imported raw materials and spares.”
Mr Makamure highlighted that consumer disposable incomes remain constrained due to restricted economic activity under Covid-19 conditions and there were positives from the payment of year-end bonuses, increased mining activity and infrastructure projects that are injecting liquidity into the market.
He also noted that in Zambia, the economy had experienced resurgent inflation and currency depreciation and in the face of rising cost of living, consumers are searching for cheaper alternatives.
Meanwhile, due to the effects of coronavirus (Covid-19) on the business, Mr Makamure said the Company will continue to review its responses to the Covid-19 pandemic based on the best available medical and safety advice with a focus to avoid or reduce transmissions of the disease through its activities.
He noted that in Zimbabwe and Zambia, the businesses were permitted to operate albeit at reduced levels during the various phases of lockdowns, while South Africa has adopted more stringent bans on the sale of alcohol.
Mr Makamure added: “There are many uncertainties that make it difficult to fully estimate the full impact of the Covid-19 pandemic on the financial health of the Company and Group entities. On the outlook, the authorities in regional markets invoked heightened levels of lockdowns in January 2021 in response to the upsurge in COVID-19 infections and emergence of more virulent strains.”
He said the business outturn for the fourth quarter will therefore be subdued although the Zimbabwean economy could benefit from improved access to foreign currency and lower inflation.
Moreover, the Company will continue placing the safety and health of its employees first and abiding by best practice as pronounced by the authorities, whilst seeking to keep the Company and Group entities afloat in the circumstance of this COVID-19 pandemic.
“The envisaged extension of the sparkling beverages franchise territory to Manicaland is awaiting regulatory approvals which are anticipated during the fourth quarter,” added Mr Makamure.