• Delta accrued US$7.3 million in sugar tax during the quarter ended June 2026
• Innscor paid US$3.19 million in sugar tax during the six months to December 2025, while Dairibord’s US$2.22 million income tax charge weakened the conversion of higher pre tax earnings into shareholder profit
• Delta is contesting a US$97 million ZIMRA assessment and has paid US$20.8 million under the pay now, argue later principle as the appeals process proceeds

Harare - Delta Corporation accrued US$7.3 million in sugar tax across its affected non alcoholic beverage categories during the quarter ended 30 June 2026, placing the levy near the annual pace recorded in the preceding financial year and increasing the amount of operating cash committed to fiscal obligations.

The company carried an equivalent sugar tax cost of approximately US$30 million during the year ended March 2026. The latest quarterly charge represents an annualised pace of about US$29.2 million, assuming product volumes, sugar content and tax rates remain unchanged.

“The Group accrued an equivalent of US$7.3 million in sugar tax across the affected non alcoholic beverage categories during the quarter. The Group continues to engage the authorities on a review of the sugar tax regime,” Delta said in its trading update.

The charge was incurred during a quarter in which group revenue increased by 23% to US$294.6 million and total beverage volumes rose by 14% to approximately 3.4 million hectolitres. Higher sales increased the production base exposed to the levy while fuel, freight, PET packaging, utilities and imported raw material costs also increased.

Zimbabwe introduced the sugar tax in February 2024 to finance cancer treatment and other non communicable disease programmes and reduce excessive sugar consumption. The general charge applies at US$0.001 per gram of added sugar on specified beverages. The rate applied to cordials was reduced to US$0.0005 per gram from January 2025 following engagement between Government and industry.

The levy enters company accounts as a direct cost on affected beverages. Manufacturers commonly respond through higher prices, margin absorption, product reformulation and changes to pack sizes and product mix.

Delta has expanded low and zero sugar products, adjusted pack and price structures and absorbed part of the charge to protect affordability. These measures preserve demand but reduce the cash generated from each unit sold where the tax cannot be fully recovered through pricing.

Sparkling beverage volumes increased by 7% during the quarter and Schweppes volumes rose by 37%. The growth confirms stronger demand across categories exposed to the levy and increases the absolute tax cost attached to production.

Innscor Africa provides the closest listed peer comparison. The group paid US$3.19 million in sugar tax during the six months ended December 2025, taking cumulative payments from the introduction of the levy to US$13.29 million. The company said the levy reduced beverage margins and called for consistent tax treatment between locally manufactured products and imports. Uneven application raises the cost carried by domestic factories and weakens their ability to compete with products entering Zimbabwe from regional markets.

Delta carries a larger tax exposure that is legally separate from the sugar levy. ZIMRA has assessed approximately US$97 million in additional foreign currency denominated income tax, value added tax, interest and penalties against Delta’s Zimbabwe businesses for the period from 2019 to 2024.

The revenue authority maintains that the obligations should have been paid in foreign currency. Delta settled the original liabilities in local currency, which was legal tender during the relevant periods, and is challenging the legal interpretation and the methodology used to calculate the reassessments.

Under Zimbabwe’s pay now, argue later principle, Delta had paid US$20.8 million by 30 June 2026 while pursuing the dispute through the fiscal appeals process.

The group also holds US Dollar denominated Treasury Bills and is seeking approval to apply those instruments against any portion of the assessment that ultimately becomes payable.

Delta said any payment arrangements should be rational and take account of the financial health of the business. The company maintains that the original tax obligations were settled in legal tender using the best reasonable interpretation of the legislation available at the time.

The US$97 million assessment and the US$7.3 million sugar tax charge arise from separate issues. The assessment concerns the currency used to settle historical tax obligations. The sugar tax is a current operating cost determined by beverage volumes and product formulations.

Both exposures increase the amount of cash directed toward fiscal obligations while Delta is expanding brewing, packaging and distribution capacity.

The group is upgrading Southerton Brewery, developing additional brewing and packaging capacity at Belmont Brewery and investing in returnable glass, logistics and raw material security. Demand is already exceeding available production across selected lager brands and pack formats.

Delta therefore faces a capital allocation test. Strong demand requires additional investment in factories and distribution. Sugar tax payments and amounts paid against disputed assessments reduce the internal cash available to fund that expansion.

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