Delta Corp posts another robust set of results

Published: 14 November 2013

Delta Corporation, the local brewing giant, posted another robust set of results showing a solid 12.2% y-o-y growth in net income to $47.2m. The robust performance was on the back of margin expansion, improved sales mix especially in SBs and sorghum beer, improved availability of SBs as well as reduced finance costs.

An interim dividend of US 1.30c per share was declared.

Total beverage volumes grew by 4% for the six months to 3.58m hl on account of a healthy 8% growth in SBs to 0.78m hectolitres (hl) and a strong growth of 9% in sorghum beer to approximately 1.79m hl, which helped to counter the 10% decline in lager beer volumes to approximately 0.93m hl. The lager volume decline was mainly attributed to the adverse effects of the excise duty increase in December 2012 and the resultant retail disruption as well as the low disposable incomes. The strong growth in sorghum beer volumes was driven by the new Chibuku Super and the move by consumers to value product offerings.

Alternative beverages (Maheu) volumes jumped up by a handsome 57% (albeit off a low base) for H1 2014 to approximately 80,000 hl. Malting tonnages declined by 10% to 16,480 tonnes in sympathy with the decline in lager beer volumes. Plastic tonnages increased by 11% to 4,767 tonnes anchored by the strong SBs volume growth.

Revenue for the six months grew ahead of volume growth at 5% to approximately $315.5m (on turnover of $367.3m). Lager gross sales declined by 4% to $164m, SBs gross sales jumped 8% to $110m and sorghum beer gross sales grew by 24% to $76m. Alternative beverages saw a 59% surge to $7m. The decline in lager gross sales was mitigated by the premium lager offerings that maintained their volumes.

Schweppes was negatively affected by increased competition especially in cordials (lower end of the market).

In a research note to clients, Addmore Chakurira of Imara Edwards Stockbrokers said, "Delta has a compelling story with its pristine balance sheet, strong cashflows and solid brands. There are high barriers to entry in this industry and Delta enjoys a dominant position with a solid distribution network."

Mr Chakurira expects Delta to sustain the margin expansion supported by improved efficiencies, enhanced product mix and improved supply chain management.

Delta remains the ZSE's bellwether stock and Imara Edwards maintained its long-term buy recommendation.
- businessdaily