Depressed economy hits Delta

HARARE - Listed brewer Delta Corporation (Delta)’s attributable income slumped seven percent to $44,1 million in the half year to September 2014, as depressed economic activity hit lager beer demand.

During the period under review, the group’s lager beer volumes went down by 25 percent to 695 000 hectolitres from 925 000 hectolitres.

Pearson Gowero, Delta’s chief executive, said the volumes dropped from a post-dollarisation peak of just over one million hectolitres registered last year.

He said the major reason behind the depressed performance was “more economic rather than a competition issue” as Delta held its market share over the period.

“…when you actually look at the total spend, it is moving kind of southwards,” Gowero told an analysts briefing on Wednesday.

He added that they noted a trend that a lot of their consumers are searching for value for money and looking for affordable products.

“(For) a lot of people (its) not necessarily out of choice, but the economics are driving them in a certain direction and we are under pressure to respond accordingly,” he said, adding that “we have in some instances had to reduce our prices.”

The brewer has seen an increase in sorghum beer demand. In the six months, sorghum beer volumes went up 14 percent driven by affordability.

As part of efforts to meet the surging demand, largely spurred by Chibuku Super, Gowero said the group was planning to set up and commission two plants to boost production.

“We are adding capacity in Bulawayo and this should be available in the second quarter of the next financial year (2015). Hopefully by the end of that year, we will open another plant at a place we will let you know at the appropriate time. Certainly by this time next year we will have two additional plants for Chibuku Super,” he said.

He added that affordability remained a major issue, notwithstanding the fact that they have had to do some price reductions.

In the period under review, Delta’s revenue was down four percent to $302 million due to softening consumer largely chasing lower priced goods and services.

Operating income decreased by nine percent to $57 million while earnings before interest, taxes, depreciation and amortisation was down four percent to $ 74,4 million. Investment activities to maintain and expand operations decreased by 52 percent to $ 13,6 million

Lager beer gross sales went down by 15 percent to $139 million while sorghum beer sales advanced 24 percent to $94 million. Sparkling beverages sales also slumped by 10 percent to $99 million as alternative beverages tumbled by 16 percent to $8 million.

 

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