Delta negotiates duty reduction

HARARE - SABMiller’s Zimbabwe unit Delta Corporation (Delta) says it is negotiating with government over a possible reduction of excise duty which has taken a toll on the group’s lager beer volumes.

This comes as authorities increased excise duty on lager beer from 40 percent to 45 percent of manufacturer’s price with effect from December last year.

The move has had a negative impact on both volumes and retail pricing.

“As you know excise (duty) is a fundamental piece in our business. If we don’t get it right it affects what we do going into future,” said Delta’s chief executive Pearson Gowero while presenting the group’s financials for the half year to September 2013.

“We are engaging authorities to try to make them to see,” he added.

Gowero said the challenges created by the excise duty increase, particularly on beer retail price, still remain, almost a year down the line.

During the period under review, lager volumes slumped 10 percent as gross revenue sales yielded $164 million as a result of soft consumer demand occasioned by liquidity and affordability constraints despite premium brands contribution chipping in to mitigate the impact of this volume loss on revenue.

The Zimbabwe Stock Exchange-listed beverage maker’s revenue went up five percent to $315 million spurred by rising sorghum beer and non-alcoholic beverages sales, which made up for a decline in lager beer volumes.

Sorghum beer volumes increased by eight percent and posted gross sales growth of 24 percent to $76 million largely driven by the successful introduction of the premium Chibuku Super brand.

Gowero said the company is planning to construct an $8 million line for its Chibuku Super brand as the company looks set to maintain its dominance on the local market.

Sparkling beverages contributed $110 million in gross sales whilst volumes increased by eight percent on the back of strong brands, improved availability and packaging innovations in the Pet range.

Earnings per share rose to 3,83 cents in the six months to end-September, up from 3,50 cents.

After-tax profit increased 12 percent to $47,2 million during the period under review as cash generated from operations increased by $5,8 million over prior year to $73,4 million.

Working capital went up on prior year largely on increased barley funding and cereals stock holding while capital expenditure was $28,4 million aimed at improving and expanding operations.

Gowero said the group will remain focused on maximising on products through improved availability, packaging innovations, a favourable mix and maintaining operating margins through productivity enhancement and cost control.

A total of $16 million will be paid out after the group declared a $1,30 per share interim dividend.

DELTA Corporation has defended its recent beer price increase arguing it needed to realise real value from its products and improve margins.

Last month, the brewer hiked the wholesale price of 375ml brown bottle beer to $0, 90 from $0,80 while 340ml green bottles went up by $0,20 to $1.

“The real reason (behind the price increase) is that we were just leaving money on the table.

“We are the guys with the infrastructure, we invested in the business and the consumers were actually just paying off the middlemen to make all the profit,” said chief executive Pearson Gowero.

“Really, what we did when we increased the prices, was to make sure we get a fair share of the value that we had created,” he said, adding that “so you find that even after the price increase, the consumer has not actually felt anything.”

Gowero noted that the $1 per pint price was the “sweet spot” as it had a psychological edge of being the fair retail price.

The price increase was on the back of government’s decision in the 2013 National Budget to review excise duty upwards from 40 percent to 45 percent to boost revenue inflows.

Comments (2)

Before we reduce the duty can you demonstrate that your costs per litre are in line with world class bench marks ? Always choose th eeasy way out dont we....

john munyaradzi - 18 November 2013

Declared Dividend is 1.3 US Cents and not $

Joe Mashava - 18 November 2013

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