• Fri. Apr 19th, 2024

ANALYSIS| Profits Surge as Delta Revenues Reach ZWL$1.9 Trillion in HY23


Nov 22, 2023

By ETimes

Financial Performance Highlights

  • Beverages giant Delta reported an ZWL$339 billion inflation adjusted after tax profit for its half year ended 30 September 2023, a 420% increase in nominal terms and a 9% in rise in US Dollar terms.
  • The group’s operating income increased by 153% to ZWL$408.4 billion, while EBITDA increased by 142% to ZWL$436 billion.
  • Total revenues increased by 164% to ZWL$1.9 trillion with the group noting strong growth in volumes across all segments and an increased proportion of forex sales to over 80%. The group commented that the consumer spending was buoyant during the period, driven by stable US dollar pricing and improvements in salaries and wages across all sectors. 
  • The lagers segment recorded a 173% rise in revenue to ZWL$815 billion, as volumes rose by 13% during the period. The group noted positive impact of a new packaging line commissioned in August 2023. Despite reporting bottlenecks in the supply of packaging materials, the group anticipates product supply to improve during the festive season.
  • The sorghum beers segment saw revenues climb 155% to ZWL$667 billion after volumes increased by 4% during the period. A new Chibuku Super production plant was commissioned in late September and is expected to drive volume growth in HY2. United Breweries South Africa recorded 2% growth in Q2, while growth for the entire period was flat. Natbrew Zambia’s volume recovery continued with 67% growth during the six month period.
  • The sparkling beverages segment reported 167% revenue growth to ZWL$311 billion as volumes increased by 17%. Product supply to the market benefited from a newly commissioned packaging line that improved the availability of packs and flavors.
  • The wines and spirits segment, AfDis, reported a 156% rise in revenues to ZWL$134 billion after volumes increased by 10% during the period.
  • Volumes at the Schweppes associate rose despite constraints in the supply of bottled water and Minute Maid products after the decommission of a production line to make way for a new installation. The Nampak associate saw modest performance as operations were constrained by prolonged power outages and raw material shortages.
  • The group’s operations generated cash flows of ZWL$98 billion, with investment expenditures reaching ZWL$189.6 billion and net financing flows of -ZWL$166 billion.
  • Total assets stood at ZWL$2.2 trillion, with cash holdings of ZWL$49.5 billion, inventories of ZWL$482.3 billion and receivables of ZWL$518.3 billion. Total liabilities reached ZWL$1.1 trillion, with payables of ZWL$655 billion and total borrowings of ZWL$44.6 billion.
  • The group reported that its ongoing tax dispute with the Zimbabwe Revenue Authority (ZIMRA) over the payment currency of taxes. The dispute has seen Delta incur a tax penalty of US$54.7 million. The group asserted its belief that it did not act improperly but noted that it could not determine the likely outcome or timing of the resolution of the dispute.
  • Looking ahead the group outlined its focus is on protecting the balance sheet, optimizing resource allocation and generating positive cashflows to fund the ongoing capital projects and turning around the regional operations.
  • The Delta Board of Directors declared an interim dividend of USc1 per share.

Commentary and Analysis

Its a financial performance that is largely reflective of Delta’s dominant position in Zimbabwe’s consumer landscape, with half-year revenues and total assets comfortably breaching the ZWL$1 trillion mark. The main take is that the group’s business is now largely dollarized and this has gone a long way towards stabilizing its capacity to reliably supply its markets. As the economy at large trends towards dollarization, Delta faces a mixed bag, with a subdued short-term economic outlook likely to constrain the group’s increased internal capacity. There’s the threat of a subdued agricultural harvest and rising agricultural commodity prices which could dampen consumer appetite in the second half-year. The comparatively weak growth in the Sorghum Beers segment could point to some challenges brewing. On the other hand, the group’s foreign operations offer hope, particularly NatBrew in Zambia. Otherwise, the group’s financial position looks reasonably secure, concerns about the low cash levels are allayed by the increased USD income, while the significant capital expenditure points to a positive medium to long-term outlook from the group’s management.

On the ZSE, since the start of 2023, the Delta share has gained 791% in nominal terms and 6% in implied in USD terms. The share is currently trading at a Price to Book ratio of 3.7x – Harare

By ETimes

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