By ETimes
Delta Corporation’s lager and sorghum beer volumes are expected to rise in the short term thanks to the ongoing capital expenditure, a local equities group has said.
IH Securities (IH) noted that production capacity remains constrained, but expects the installation of two new plants in the first half of 2023 to improve supplies.
Lager sales remained the group’s top earning segment, with revenues rising by 71% to ZWL$84.8 billion after volumes increased by 18% in the half-year ended 30 September 2022.
Sorghum beer sales recorded growth of 53% to ZWL$74.4 billion, with volumes growing by 14%.
“On the demand side, expectation is that bottom of the pyramid liquidity in the informal sector will remain firm into the festive season propelling hard currency sales,” the equities group said.
“From ongoing capital expenditure, we expect volumes momentum in these two key segments to increase in the short term.”
A third plant to increase PET capacity is to be launched in Q1 2024, aiding in the recovery of market share for sparkling beverages.
“Focus for Delta in the interim will be on uprating production and route to market efficiencies to cover for capacity limitations, stabilising their supply chain and intensifying market facing activities,” IH stated.
For forecasts to remain relevant in the present inflationary environment, IH Securities said “we have shifted to a US dollar-based valuation of the business”.
“We expect revenue for Delta to register to US$807 million from a combination of volume growth and market-friendly pricing initiatives.”
It expects Delta’s EBITDA margins to register at 25% in FY23 while net margins will ring in at 17%.
The Delta Corporation posted a ZWL$18.5 billion inflation adjusted after tax profit for its half-year ended 30 September 2022. The performance was a 27% decline from the 2021 comparative, although profit before tax was up 34% to ZWL$44.5 billion and operating income was up 88% to ZWL$46 billion.
Inflation adjusted revenues climbed 63% to ZWL$207.8 billion. The group attributed the growth to rising sales volumes and replacement cost pricing, also noting a rise in foreign currency takings – Harare