Delta Beverages revenue decline 1%

Published: 10 April 2014

Delta Beverages recorded a 1% decline in revenue for the 12 months to 31 March 2014 while the total beverage volume remained flat on prior year and down 6% for the fourth quarter, zfn reported.

In a trading update the group indicated that total revenue was down 9% for the quarter and 1% down for the full year.

"The full year financial results will largely be in line with the revenue performance. The slowdown in consumer spending and economic activity reported in the last update persisted into the fourth quarter which was characterised by rapidly declining consumer disposable incomes," the group said.

The total beverage volume for the full year is flat on prior year and down 6% for the fourth quarter.

Sales outturn reflects growth in sorghum beer and alternative beverages and a decline in lager beer and sparkling beverages.

"The lager beer volume was 26% below prior year for the quarter and down 18% for the full year. This reflects both softening demand and the impact of high consumer prices driven by the high levels of excise duties. Prevailing retail prices remain above recommended levels," noted the statement.

Furthermore, sparkling beverages "are down 13% for the quarter and 2% for the full year" as the company experienced an out of stock situation during the quarter occasioned by an extended water supply disruption at the main factory in Harare.

The sorghum beer category is up 10% for the quarter and 12% for the full year, with the new Chibuku Super contributing 10% of this volume.

Alternative beverages (Maheu and new dairy based beverages), as indicated by the statement, are up 11% on prior year for the quarter and 33% for the year.

In an analyst note, Imara Stockbrokers said they were surprised by the decline in the SBs as they had anticipated volumes to have increased.

"Given the prior updates what surprised us was the decline in SBs as we anticipated volumes to have increased. We note that the group's product mix ensured that overall beverage volumes remained flat. Generally, volume growth in sorghum increases on the back of shrinking disposable incomes as consumers trade down from lagers and vice versa when times are good."

The Stockbrokers advised its clients to buy Delta as it has an upside potential of 31%.

"The share price has eased 17% YTD and we believe that the current price levels offer excellent entry points, as Delta remains the ZSE's bellwether stock. Our revised price target of $1.50 implies an upside potential of 31%. We upgrade our recommendation from LT Buy to BUY."

The full year results are expected to be published on 15 May 2014.
- zfn