Delta Corporation highlights Zimbabwe's economic fragility amidst revenue growth

Tawanda Karombo

Delta Corporation, Zimbabwe's leading brewer and soft drinks manufacturer, has painted a stark picture of the nation's economy, highlighting its persistent fragility despite signs of resilience in consumer spending.

This comes amid intensifying competition in some of the company’s product categories and poor economic policies that are weighing down manufacturers.

Delta Corp has the highest capitalisation on the Zimbabwe Stock Exchange.

For the year to the end of March the company raised revenues by 5% to $807 million. However, this revenue increase was achieved against the backdrop of a tough operating environment.

“Overally, the economy remains fragile and presents significant operational challenges,” said Todd Moyo, chairman of Delta Corp on Thursday.

Moyo said the local operating environment was fraught with “challenging route to market policies, constrained market access arising from poor road infrastructure and rehabilitation programs, high inflation” and an unstable domestic currency.

However, consumer spending in Zimbabwe has remained resilient, benefiting from mining activities, government infrastructure projects as well as rising diaspora remittances. 

Still, aggregate demand for the company’s products was affected by lower mineral prices and the reduced agricultural output due to prior year drought.

During the period under review, Zimbabwe - has also had to rely on imported stocks of staple maize for domestic and industrial manufacturing purposes - reported a decline in tobacco output.

Tobacco is a major sustainer of purchasing power in Zimbabwe, with companies such as Delta benefiting from communal and small scale tobacco farmers’ earnings.

Delta Corp has urged the government to “implement policies that would ensure the stability of the local currency and access to foreign currency through the banking channels or through trading” channels.

The revenue surge for Delta was reflective of volume growth in the company’s lager beer and the impact of the sugar tax, which forced price increases in its sparkling beverages division.

“The proportion of domestic sales undertaken in foreign currency was around 80% for most of the year although there were periodic shifts in response to the performance of the formal retail sector which was affected by exchange rate disparities and the level of enforcement of the dual pricing regulations,” said Moyo

Operating income for the period as expressed in earnings before interest and tax amounted to $153m, largely in line with prior year’s earnings. The profit before tax for the period grew $139.9m from $104.4m a year earlier.

Moyo said that the prior year comparative pre tax profits for Delta Corp included currency related distortions, with trading margins in the current period partly affected by the under recovery on the sugar tax and the higher cost of imported maize.

The company paid as much as $20.7m in sugar tax to the government. Delta manufacturers soft drinks through its units Delta Beverages and Schweppes Zimbabwe.

It also commented that Zimbabwe’s Gold (ZWG) currency, which was introduced in April last year and has suffered from inflationary and widening disparity of market exchange rates leading to the 43% devaluation at the end of September 2024. 

Delta noted that official exchange rates enforced by the government on local businesses for trade purposes no longer fully reflected prevailing market conditions.

“The currency was relatively stable during the second half of the year although the market premiums remained high. There were significant exchange losses arising from the devaluation of monetary assets, particularly cash holdings and debtor balances on 27 September 2024,” said the company.

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