Harsh economy affects Delta: SABMiller

HARARE - Global brewer SABMiller says the current economic crisis in Zimbabwe has affected the bottom-line of its subsidiary Delta Corporation (Delta).

“The economic environment in Zimbabwe hampered the performance of our associate, Delta, with lager volumes declining by 18 percent,” said Alan Clark, SABMiller chief executive.

“However, traditional beer volumes grew strongly at 12 percent, supported by the innovative Chibuku Super… soft drinks volumes also grew in the year,” he said.

This comes as the prospects for the projected 6,1 percent economic growth this year of the southern African country are slowly fading away due to a biting liquidity crunch, deflation and lack of aggregate demand.

The World Bank has already forecast a 3,4 percent gross domestic product growth this year while equities advisory firm MMC Capital has projected a 1,5 percent growth.

In the year to March 2014, Clark said, lager volumes in Africa grew by six percent buoyed by growth in a number of markets, although growth was hampered by poor economic fundamentals in South Sudan and Zimbabwe.

“Our portfolio continued to be relevant to our consumers with Castle Lite volumes up 31 percent, supported by strong performance across our local mainstream brands, as well as Eagle lager in the affordable segment,” he said.

Clark said Chibuku Super, a traditional beer in plastic packs with a longer shelf life, was now available in five markets, having been launched in Mozambique during the year and in Tanzania and Malawi recently.

Meanwhile, Delta says the economy requires a quick policy shift to stimulate growth after a poor performance in 2013 blamed on weakening consumer demand and high government levies.

Volumes for Delta’s mainstay lager beers dropped 18 percent in the full-year to March 31 while total beverage volumes remained flat compared to the prior year.

“I think one thing that is apparent is that we are witnessing worsening economic fundamentals. Everyone was hopeful post the election in July last year and I think some part of that hope is slowly turning into some kind of despair,” said chief executive, Pearson Gowero at a briefing for the group’s 2013 full year results.

Zimbabwe’s economy has slowed down since the July 31 polls, which saw an end to a four-year unity government.

The country has also struggled to attract Foreign Direct Investment in recent years or funding for its economic blueprint, ZimAsset due to concerns over the perceived lack of respect for property rights and uncertain business climate, in particular the implementation of the empowerment law.

“The trends that we were seeing post-Christmas are the same trends that we are trading at the present moment so we are not seeing any green shoot. We haven’t seen any rays of hope. Let’s put it, we really like the stakeholders particularly government to make the right decisions and in some instances bite the bullet so that we can get our economy going,” said Gowero. The company had suspended its contract farming scheme for barley due to high stocks, he added.

Sparkling beverages gross sales dropped two percent to $225 million.

Consumers were switching to affordable alcoholic beverages such as sorghum beer, Chibuku, whose gross sales grew 24 percent to $146 million for the full year. The group would this year commission a third plant at a cost of up to $10 million to grow revenues, Gowero said.

The contribution of associate companies also fell, weighed down by Schweppes Zimbabwe whose supply chain was largely affected by the recent acquisition of Mazoe Estates by government.

Gowero said wines maker, African Distillers was expected to register strong growth in the current year after commissioning a new cider making plant.

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