Delta Corporation on recovery path


Zimbabwe Stock Exchange listed beverages giant, Delta Corporation, reported an encouraging set of results for the half year to September 2020, defying the impact of Covid-19 related restrictions that characterised the reporting period.

Delta, which for the better part of last year, and probably the previous one, reported double digit volumes decline, saw remarkable growth in most of its segments with the exception of the traditional beer one.

During the period under review, lager beer sales volume grew by 3 percent, sparkling beverages by 22 percent, with the only blemish coming from sorghum beer where volumes fell by 31 percent.

In a statement accompanying the results, chairman Mr Canaan Dube, said the recovery in lager beer volumes is underpinned by competitive pricing and consistent supply that resulted in market confidence.

For the sparkling beverages, Mr Dube said in addition to competitive pricing and consistent supply, there was a swing in volume towards non-returnable take home packs, reflecting the reduced out of home activity due to Covid-19 restrictions.

The sorghum beer segment, which counts the rural consumer as a key market, however, saw volumes fall by 31 percent.

The decline, according to Mr Dube, was due to “limited access to key trade channels such as bars, bottle stores and the rural markets during lockdown.”

Delta also enjoyed positive contribution from associate Afdis, where volumes grew by 15 percent, driven by spirits and ready to drink categories. This is despite some supply gaps arising from challenges in the logistics of imported raw materials.

The contribution from Schweppes Holdings was, however, negative with volumes coming off by 18 percent. Challenges in accessing raw materials and the impact of Covid-19 contributed to the decline.

Delta said its businesses in Zimbabwe are witnessing recovery in volume and profitability on the back of improved access to foreign currency through domestic nostro sales and benefits from a stable exchange rate.

“The easing of the lockdown restrictions across the region is expected to rekindle economic activity and consumer spending,” Delta reckons.

Delta’s financial numbers are also decent with earnings per share of $3,39 giving the company a solid 22,6 times price earnings ratio.

The beverages giant also declared an interim dividend of $0,45 which at the current share price, gives a yield of 3 percent.

This is after the company managed an 11 percent growth in revenue to $12,9 billion in inflation adjusted terms. The growth in lager beer volumes, helped the segment overtake sorghum beer segment to become the biggest contributor to Delta’s revenue and operating income.

For the six months to September 2020, lager beer contributed $5,2 billion to Delta’s revenue (HY2019: $4,1 billion) while sorghum contributed $5,1 billion (HY2019: $5,3 billion)

Lager beer contributed $1,6 billion to Delta’s operating income (HY2019: $1,1 billion) while sorghum contributed $1,1 billion (HY2019: $1,3 billion)

Operating income grew 15 percent to $4 billion while EBITDA grew by 12 percent to $4,5 billion.

In US dollar terms, Delta’s operating income has grown by 13 percent since September 2015. Its market capitalisation has however fallen to US$237 million compared with US$877 million in 2015. –