Delta could increase shareholding in Afdis

Published: 14 November 2013

ZSE-listed wines maker, African Distillers Limited (Afdis), has begun talks that could possibly result in beverages firm, Delta Corporation, increasing its shareholding in the company.

There has been no official comment from Delta concerning the proposed purchase of additional Afdis shares, but there is increasing speculation that the country's largest manufacturer, distributor and marketer of alcoholic and non-alcoholic beverages is planning to consolidate its grip on the beverages market by creating a strong family of brands to deal with foreign exports.

Afdis operates a distiller in Mutare which produces international brands under licence.

Market watchers said they expected the beverages group to inject a significant amount of cash into Afdis to give it control of the asset.

"There is a possibility that Delta could increase its shareholding to as much as 50 percent in Afdis," a source who has closely followed the developments said this week.

Afdis, whose major shareholders include Zimbabwe's biggest manufacturer of alcohol and non-alcoholic beverages Delta Corporation and insurance giant Old Mutual, has of late been seeking new funding, earmarked for maximising production efficiencies as well as entrenching its market position.

The company said in an announcement that it was finalising funding options with key shareholders over its expansion drive.

Delta currently controls about 30 percent of Afdis.

"African Distillers Limited advises its shareholders that the company is engaged in negotiations which if concluded successfully will have a significant impact on its operations and share price. Shareholders are accordingly advised to exercise caution when dealing in the company's securities until a further announcement is made," said a cautionary statement issued by the company last week.

Afdis has however, reported a surge in capacity utilisation at its plant, bucking an industry-wide trend that has seen capacity utilisation declining due to liquidity constraints and antiquated machinery.

The beverages production business is one of the few that has remained robust in Zimbabwe despite the liquidity crisis that has affected operations in other industries.

Delta boosted capacity utilisation to 100 percent and enjoys a near-monopoly on the domestic beverages market.

Since the introduction of the multiple currency system in 2009 and the subsequent liberalisation of the economy, Afdis has been facing a number of challenges such as liquidity constraints and increase in smuggled alcohol into the country which had eaten into the company's market share.

Economic experts contend that smuggled alcoholic beverages continue to find their way into the country.

At the company's annual general meeting last week, Afdis managing director, Cecil Gombera, said the business was on a growth trend after turnover in the first quarter increased nine percent against the same period the previous year.

He said Afdis was on course to achieve a 20 percent growth in turnover at the end of the financial year ending June 30 2014 while a 16 percent volume increase is also expected.

"We are planning to bring a new bottling line by June 2014 so that we will be able to do local bottling to some of the brands that we have been importing. We are on a modernisation drive to match the demands of the regional and international markets, at the same time meeting the demands of our growing base of consumers," he said.

He said the group wants to achieve an 85 percent market share for all segments.

Gombera said volumes had grown six percent mainly boosted by locally produced products.

Brown spirits had grown by more than 30 percent as had the whiskies in particular the Gold Blend brand.
- fingaz