Delta Corporation, Zimbabwe’s leading beverage producer, reported steady demand across all product categories for the third quarter ending December 31, 2024, despite facing a tough economic climate.
In its trading update for the period, Delta, which operates in lagers, sparkling beverages, and sorghum beer, highlighted the challenges of disruptions in utility supplies and fluctuating consumer spending, particularly during the traditional summer peak season.
“Despite these hurdles, demand across all categories remained robust,” the company noted.
The introduction of a sugar content surtax in January 2024 led to significant price hikes for soft drinks and cordials. Delta stated that the surtax reduced its price competitiveness, contributing to increased imports of similar products from neighboring countries.
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Additionally, rampant smuggling exacerbated the situation.
However, consumer spending showed resilience, bolstered by mining activities, government infrastructure projects, and steady remittances from the diaspora.
The company reported a 1% increase in revenue for the quarter compared to the previous year, with a 7% increase for the first nine months, reflecting mixed performance across its various business units. The revenue growth in soft drinks was partly due to price adjustments made in response to the sugar tax.
Throughout the year, sales in US dollars consistently accounted for over 70% of total revenue. Delta also paid US$31.2 million in sugar tax between February and December 2024, covering both sparkling beverages and cordials.
Lager beer volumes increased by 4% year-on-year for the quarter and by 7% for the nine-month period. Despite disruptions caused by extended water and power outages, Delta benefited from recent investments in capacity expansion and the addition of new glass supplies.
Sorghum beer volume in Zimbabwe grew by 2% in the quarter but declined by 2% for the nine months compared to the prior year. The sparkling beverages segment, however, saw a 16% decline in volume for the quarter and a 1% decline for the nine-month period, primarily due to price hikes related to the sugar tax and an influx of imports.
Schweppes experienced a 27% volume drop for the quarter and a 17% decline for the nine months, largely due to price increases stemming from the sugar tax.
At Nampak Zimbabwe, overall volumes fell by 25% in the quarter, driven by reduced demand for packaging materials due to a poor tobacco crop, power cuts, plant breakdowns, and increased competition in other sectors.
Delta is currently challenging tax assessments issued by the Zimbabwe Revenue Authority (ZIMRA), which claims the company owes US$73 million in taxes, penalties, and interest for the period between 2019 and 2022. These assessments do not take into account local currency payments made during that time, which have lost value due to inflation and currency depreciation. Both the High Court and the Supreme Court have issued unfavorable judgments, but Delta is pursuing appeals and other legal avenues, including in the Constitutional Court and ZIMRA’s appeals process.
As of December 31, 2024, Delta had paid US$9.2 million in taxes under a “pay now, argue later” approach, in accordance with pre-existing payment plans. The company expressed confidence that any adjustments to the payment plan would be reasonable, considering the company’s financial health and the fact that the principal amounts had been settled in local currency based on the interpretation of the law at the time.
Delta also holds substantial Treasury Bills receivable from the government, which could be used to settle future tax obligations.
Looking forward, Delta remains committed to driving demand and positioning itself for future growth.
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