Delta Corp volumes drop on price hikes

Published: 26 April 2019

BEVERAGES producer, Delta Corporation, has recorded subdued volume performance for the quarter ended March 31, 2019 amid declining demand due to price increases.

In a trading update for the period under review, the corporation's company secretary, Mr Alex Makamure, said lager beer volumes declined by three percent in comparison to prior period but was up 31 percent in the full year.

"Demand has reduced due to the increase in RTGS wholesale and retail prices. The sorghum beer volume in Zimbabwe contracted by two percent versus prior year for the quarter and grew by five percent for the full year," he said.

Demand for sorghum beer remains encouraging despite the cost pressure on imported packaging material, spares and the pricing of agricultural cereals, said Mr Makamure. He said Chibuku Super contributed 85 percent of the total category control.

"National Breweries Plc Zambia (Nat Brew Plc) recorded a volume decline of 24 percent for the quarter and it is flat on prior year for the 12 months. Product demand has reduced following some price increases and down trading to subsistence offerings," said Mr Makamure.

The sparkling beverages business was virtually closed during the quarter due to non-availability of imported raw materials.

"Volume declined by 89 percent compared to prior year for the quarter and decreased by 44 percent for the full year. Operations have since resumed albeit at a slow pace. There are ongoing collaborative interventions together with The Coca-Cola Company (TCCC) to restore the business to sustainable footing," he said.

On trading environment, Mr Makamure said the fiscal and monetary policies implemented between October 2018 and February 2019 have significantly altered the trading environment.

Of particular note was the two percent transaction tax, the adoption of the RTGS$ as the functional currency and the introduction of an exchange rate of the RTGS$ to the US dollar, said Mr Makamure.

"The value of the RTGS$ deposits continue to be eroded by the fast depreciating exchange rates and cost push inflation. Resultantly, there has been severe decline in aggregate demand.

"The acute shortage of foreign currency persists despite the introduction of the interbank forex market. The exchange rate needs to be supported by robust and complementary fiscal and monetary policies," he said.

Mr Makamure said shareholders were reminded that the company was trading under a cautionary issue with respect to the notice received from TCCC advising of an intention to terminate the Bottler's Agreements with the group entities (Notified Intention).

This followed the merger of AB InBev and SAB Miller in October 2016 and the subsequent agreement in principle reached between TCCC and AB InBev to explore options to restructure the bottling operations in a number of countries.

"There are ongoing discussions amongst the parties that are expected to result in the withdrawal of the notified intention," said Mr Makamure.
- chronicle

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