Online Reporter
Oliver Kazunga
Senior Business Reporter
Delta Corporation, Zimbabwe’s largest beverage producer, reported relatively strong demand across all product categories in the third quarter ended December 31, 2024, despite the challenging economic environment.
In a trading update for the period under review, Delta, with business units encompassing lagers, sparkling beverages, and sorghum beer, navigated an operating environment characterised by disruptions in utilities supply and varied consumer spending patterns during the traditional summer peak season.
“Despite these challenges, demand remained relatively strong across all categories,” said Delta.
It said the introduction of the sugar content surtax in January 2024 necessitated significant increases in the prices of soft drinks and cordials.
Delta said the surtax negatively impacted its price competitiveness, thereby fuelling the influx of imports of similar products from the region.
The situation was further exacerbated by rampant smuggling.
However, “consumer spending remained resilient, benefiting from mining activities, the expansionary effect of the Government infrastructure projects and the steady flow of diaspora remittances.”
The group’s revenue for the quarter increased by 1 percent compared to prior year and grew by 7 percent for the nine months, reflecting the mixed volume performance across business units.
The revenue increase in soft drinks was partially driven by price increases implemented in response to the sugar tax.
Throughout the year, US dollar sales consistently exceeded 70 percent of total sales.
Delta paid a total of US$31,2 million in sugar tax between February and December 2024, encompassing both sparkling beverages and cordials.
Lager beer volume grew by 4 percent over prior year for the quarter and 7 percent for the nine months.
“There were some disruptions to supply arising from prolonged water and power outages,” said Delta but overall “product supply benefited from the recent investments in capacity and injection of additional glass.”
The domestic sorghum beer volume for Zimbabwe grew by 2 percent for the quarter but declined by 2 percent for the nine months compared to prior year.
The sparkling beverages volume declined by 16 percent compared to prior year for the quarter and 1 percent for the nine months.
“The volume loss is attributed to the impact of sugar tax-induced price increases and the surge in imports from the region,” said Delta.
Schweppes reported a 27 percent volume decline for the quarter and a 17 percent decline for the nine months.
This significant decrease was primarily attributed to price increases implemented in response to the sugar tax.
At Nampak Zimbabwe, overall volume for the quarter ending December 2024 declined by 25 percent compared to the previous year as the low tobacco crop led to decline in demand for packaging material, production stoppages caused by power cuts and plant breakdowns and increased competition in other segments.
Delta is contesting the tax assessments issued by the Zimbabwe Revenue Authority (ZIMRA) for money that it considers to have been payable exclusively in foreign currency.
Additional assessments were received in November 2024 adding to those assessed in 2022, to bring the disputed amount to US$73 million, which covers principal tax, penalties and interest for value added tax and income tax for periods 2019 to 2022.
The assessments do not consider the local currency payments made at the relevant time, which have since been debased through inflation and currency depreciation.
Adverse judgements have been made by both the High Court and the Supreme Court, although there are appeals and new cases at various stages in the courts including the Constitutional Court and the Zimra appeals processes.
Delta paid a total of US$9,2 million as at December 31, 2024 in line with the “pay now, argue later” principle and pre-existing payment plans.
“We believe any revisions to the payment plan will be rational, with due consideration of the financial health of the business and the fact that the principal amounts were fully paid in legal tender at the relevant periods, based on the best available interpretation of the legislation,” said Delta.
The Group holds a significant amount in Treasury Bills receivable from the Government, which could potentially be utilised towards the settlement of any future tax liabilities.
Looking ahead, the group remains focused on pursuing activities that will stimulate overall demand and position the business for future growth.
