• Delta’s adjusted revenue performance indicated a decline of 5% to 10% after accounting for sugar tax-related price increases
  • The company stated that lager beer supply was impacted by water and power outages, largely beyond its control
  • Almost all operating Sub Business Units reported adverse financial outcomes during this period

Harare-The ZSE’s most valued company and the country’s biggest beverages maker Delta has released a trading update for the 3 months period to December 2024 painting a very dull picture on performance, one of its worst in recent periods. In the period under review almost all operating Sub Business Units reported adverse financial performance outturns. The period was largely characterised by power and water outages in Zimbabwe and Zambia, currency volatility and policy adjustments in Zimbabwe.

In a period where supply shortages of lager beer were noted across the country especially at the tail end of it, around the festive period, the beer maker reported a muted adjusted overall revenue growth for the company. Our estimates shows that on a like for like basis the quarterly revenue performance was adverse after adjusting for sugar tax induced price increases.Once these are removed, the company would have suffered a revenue decline of between 5% to 10% for the quarter, reflecting how tough the period was across all operating segments.

The company however said supply for lager beer in the market was impacted by water and power outages, all exogenous matters largely outside of its control. Zimbabwe continued to face acute power outages through to year end as the state power company ZESA failed to stabilise supply both from imports and available local capacity, a phenomena which is ongoing. Some companies which are into manufacturing and production at primary levels requiring substantial energy, have been pursuing construction of own micro power plants largely through solar. The same energy fate was also experienced in the second biggest operation in Zambia, albeit at a reduced scale compared to Zimbabwe.

Lager beer volumes overall went up by 4% for the quarter and 7% for the nine months period to December. The performance was aided by capacity investments. Lager beer is the mainstay of Delta contributing the most to profitability ahead of all other SBUs. Other SBUs saw a nose dive at a remarkable rate and these included Schweppes which reported a 27% decline in volumes for the quarter and a 17% decline for the cumulative 9 months period to December. At Nampak, whose parent company recently announced that it is exiting Zimbabwe, volumes plunged by 25%. Nampak is not an investee company but a critical and strategic value chain supplier of packaging materials for the beverages maker.

South Africa’s sorghum beer operation reported a 15% decline in volumes while Zimbabwe’s sorghum beer operation recorded a 2% and -2% growth in volumes for the quarter and nine months period respectively. Sparkling beverages saw a 16% drop in volumes for the quarter and a 1% decline for the 9 months. At Natbrew Zambia, volumes dithered by a double-digit rate of 28% for the quarter capping a very disappointing quarter for Delta.

Delta faces a complex operational environment with significant external pressures from economic policy, currency instability, and taxation. While some segments like Lager Beer show resilience, others are struggling with market dynamics and cost pressures. The company's strategic responses, such as product diversification and sustainability efforts, are positive, but the effectiveness of these strategies will heavily depend on the resolution of tax disputes and stabilization of the economic environment. The focus on penetrating new markets and managing costs will be crucial for Delta's future performance.

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