By ETimes
HARARE – The operating environment was significantly influenced by exchange rate fluctuations, utility supply disruptions, and consumer spending patterns, according to Delta Corporation’s third quarter report ending December 31, 2024.
While demand remained resilient, these factors created inefficiencies, such as suboptimal stocking patterns in retail channels. The narrowing gap between official and alternative exchange rates is a positive development, though overall market pricing continues to suffer from misalignments.
SEGMENT PERFORMANCE
Lager Beer
Growth of 4% in Q3 and 7% over nine months reflects strong demand and capacity investments, despite supply chain disruptions due to water and power shortages. Sponsorships and marketing initiatives appear effective in maintaining consumer engagement.
Sorghum Beer
Domestic volumes grew by 2% in Q3 but declined by 2% over nine months, with export cessation being a key driver. Regional entities, such as Natbrew Zambia, faced severe declines due to supply chain disruptions, power outages, and rising maize costs, highlighting structural weaknesses in operations outside Zimbabwe.
Sparkling Beverages
A 16% decline in Q3 volumes underscores the impact of sugar tax-induced price hikes and the influx of cheaper imports. While low- and zero-sugar offerings show promise, pricing distortions and tax burdens remain significant obstacles.
Wines and Spirits
The segment saw robust growth (14% for Q3 and 12% year-to-date) due to reduced competition from smuggled imports and effective product supply management. This is a bright spot in the portfolio.
FINANCIAL PERFORMANCE
Revenue growth of 1% in Q3 and 7% year-to-date indicates mixed results across segments. However, the high contribution of US dollar sales (above 70%) is a strong resilience factor in mitigating local currency volatility. The substantial sugar tax burden of $31.2 million weighed on profitability, highlighting the sector’s exposure to regulatory risks.
Tax and Legal Issues
The ongoing dispute with the Zimbabwe Revenue Authority (ZIMRA) regarding tax assessments (totaling $73 million) creates significant uncertainty. While the company has paid $9.2 million under the “pay now, argue later” principle, further adverse rulings could materially affect operations. Ambiguities in tax legislation exacerbate the risk of future disputes.
Operational Resilience and Sustainability
Delta continues to demonstrate operational resilience through strategic product diversification, investments in capacity, and brand activation. The sustainability initiatives, such as recycling campaigns and promoting responsible alcohol consumption, underscore the company’s commitment to long-term environmental and social goals.
Outlook
The macroeconomic environment remains challenging, with high input costs and tax burdens creating pricing pressures. The company emphasizes the need for policy reforms to stabilize the local currency and improve formal access to foreign exchange. Despite these challenges, Delta positions itself to capitalize on increased consumer spending through strategic growth initiatives.
Our thoughts: “Delta Corporation’s Q3 performance reflects resilience in a difficult operating environment. While certain segments, such as Lager Beer and Wines & Spirits, show growth, others face significant challenges due to regulatory pressures, rising input costs, and supply chain inefficiencies. The company must navigate policy and tax uncertainties while capitalizing on opportunities in its diverse portfolio. Strategic investments in sustainability and consumer engagement remain critical for maintaining market leadership.”