'Duty suspension to bolster Delta bottom line'

HARARE - SABMiller’s Zimbabwean unit Delta Corporation (Delta) has received an excise duty reprieve from government, a development analysts say will grow the beverages maker’s bottom line.

Last Friday, Harare suspended duty on bottler grade sugar for six months.

Delta, along with fellow juices maker Schweppes Zimbabwe Limited, will be allowed to import a maximum of between 1 200 metric tonnes (MT) and 2 000 MT of bottler grade sugar per month respectively.

Market analysts told Business Live that the six-month removal of duty on bottler sugar — a key raw material in beverages manufacturing — will “bring a smile on the brewer’s face”.

“Import duties should be completely removed from beverages raw materials or made as little as possible to encourage local production and stimulate consumption,” said an economic analyst who preferred anonymity.

“As a result, this will not only help Delta to grow its bottom line but will also see Treasury getting increased taxes from the beverage manufactures,” he said.

Last year, Delta made total tax remittances of $173 million.

This comes as Delta has been negotiating with government over a possible reduction of excise duty which had taken a toll on the group’s lager beer volumes.

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

However, the move impacted negatively 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 the future,” Delta’s chief executive Pearson Gowero said last year.

Delta controls about 90 percent of the beverages market in Zimbabwe.

In the half year to September 2013, the group — about 40 percent owned by SABMiller — recorded after-tax profit of $47,2 million, up 12 percent from a prior comparable period. During the period, cash generated from operations increased by $5,8 million to $73,4 million.

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.

Revenue went up five percent to $315 million spurred by rising opaque beer and non-alcoholic beverages sales, which made up for a decline in lager beer volumes.

Opaque 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.

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

Earnings per share rose to 3,83 cents in the period under review, up from 3, 50 cents in same period last year.

The brewer’s stock gained a cent to close at 115,1 cents on Tuesday.

 

 

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