Delta pins hopes on multi-currency

LISTED beverages producer, Delta Beverages anticipates a continuation of the current policy environment anchored by the multicurrency trading system with increased dollarisation saying it continues to benefit from the increased economic activity and higher consumer spending arising from Government infrastructure projects.

In its 2023 Annual report, the entity said increased dollarisation of the economy may result in reduced volatility of inflation and the exchange rate.

Zimbabwe has witnessed continued strengthening of the local unit against the US dollar following a series of policy interventions by the Treasury and monetary authorities, which mopped up excess local currency liquidity.

Some of the interventions included the directive for all import duties to be paid in Zimbabwe dollars, except for luxury items, the transfer of external payment obligations from the Reserve Bank of Zimbabwe (RBZ) to the Treasury and the introduction of the wholesale foreign currency auction for banks.

Reserve Bank of Zimbabwe (RBZ)

According to the report, chairman, Mr Sternford Moyo said group revenue increased by 60 percent to ZW$537 billion in inflation adjusted terms, reflecting the volume gains across business units and the replacement cost-based pricing.

Earnings before interest and tax (EBIT) grew by 29 percent to ZW$99,79 billion which indicates the benefits of higher throughput and focused cost management.

In historic cost terms, the group revenue grew by 423 percent to ZW$452 billion compared to average inflation of 221 percent while EBIT) grew by 371 percent to ZW$102 billion, reflecting the higher volumes, inflationary stock holding gains and the realignment of cost structures as the economy dollarised.

“We anticipate a continuation of the current policy environment anchored by a multicurrency trading system with increased dollarisation. The increased dollarisation of the economy may result in reduced volatility of inflation and the exchange rate, however there is a risk that increased dollarisation may lead to economic contraction,” said Mr Moyo.

He added that with the improved 2023 agricultural season, increase in mining activities and the election spending, the economy stands to benefit.

“The business continues to benefit from the increased economic activity and higher consumer spending arising from Government infrastructure projects, the upsurge in mining activities and higher diaspora remittances.”

Mr Moyo said although there are headwinds in the global economy, which are driving commodity pricing and supply disruptions, and the volatility of international financial markets, focus remains on leveraging on the ongoing capacity investment projects to exploit any emerging growth opportunities.

“Aggregate demand will benefit from the recent policies on beneficiation of mineral ore before exportation, diaspora remittances and infrastructure projects,” he noted.

According to the report, Delta noted that Zimbabwe maintained significant contributions in foreign currency takings and has been managing the value chain partners to utilise both currencies.

It notes that consumer spending continued to be buoyant, being boosted by stable US Dollar pricing, and modest improvements in wages and salaries across various sectors.

There were reduced supply bottlenecks as the entity had improved access to foreign currency. This allowed the businesses to maintain plant and machinery and increase raw materials stock covers.

“The businesses were able to increase production output and to offer an improved range of our brands and packs more consistently. We continued to inject new glass bottles into the Lager Beer and Sparkling Beverages businesses. This allowed better factory efficiencies and consumer access to the more affordable returnable packs,” reads part of the report.

Lager beer volumes grew 17 percent above the prior year, closing at a record 2,2 million hectolitres. Demand remained firm throughout the year, benefiting from improved product supply.

The improvement in product supply was mainly due to the efficient utilisation of existing production capacity and the investment in additional returnable glass bottles.

In the period under review, Delta notes that there were shortages of cans and glass in the region which limited the availability of one-way convenience packs.

Packaging capacity was limited resulting in intermittent mismatches of demand and supply of brands and packs.
Additional packaging capacity is expected to be commissioned in the second quarter of the 2024 financial year.

Chibuku

It said all of its trading channels saw growth in volumes against the prior year benefiting significantly from improved product availability.

On the sorghum segment, the volume outturn of 4,1 million hectolitres was nine percent above the prior year, trending towards its historical peaks.

There was an increase in the contribution of the standard Chibuku Scud returnable pack. Demand remained firm during the year, spurred by higher consumer spending from commercial crops, increased mining activity, and Government infrastructure projects.

However, the Maheu volume declined by 12 percent during the year partly due to slower uptake on switching to the Ades brand and some escalation in value chain costs such as packaging.

-chronicle