Delta hopes tax cut will halt declining sales

BEVERAGE maker Delta Corporation has sounded alarm over the impact of the poor economic outlook on its financial performance, but hopes the recent reduction in excise duty on lagers and the resumption of barley malt exports to Zambia and Mozambique could offset the impact of softening beverage demand.

The government’s decision to reduce excise duty on lager beers, from 45 percent to 40 percent took effect this month.

Company Secretary Alex Makamure said the company had budgeted $17 million for a new sorghum beer plant in Bulawayo. Sorghum products have been Delta’s best performing line in the past two years when demand for other beverage types started weakening, but even they also recorded lower volumes in the third quarter to December 2014.

Makamure said Delta is currently engaged in toll malting for regional markets.

“It will take a while to recover from the volume decline registered in the last two years. The economic outlook is not positive, but maybe the price adjustments will arrest the decline,” Makamure said in a written response to questions.

“We have capacity to produce 35,000 tonnes of malt of which half is absorbed in the domestic market. We are currently toll malting barley for Zambia hence the capacity is available for pure exports at about 8,000 tonnes per annum. The malt prices fluctuate in sympathy with international markets.”

Delta Corporation revenue for the third quarter to December was down 10 percent on weakening demand for its product mix, the company said on Tuesday, warning of lower profit margins.

Lager beer volumes for the third quarter to December were down nine percent on weakening consumer spending.

Soft drink volumes for the period under review were also down five percent while sorghum beer, which lately had shown strong volume growth, was down one percent due to constrained brewing capacity and utility outages. – Bernard Mpofu/The Source