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Enacy Mapakame
The country’s biggest company by market capitalisation on the local bourse, Delta’s sales volume performance in the financial year 2021, is anticipated to be depressed on the back of obtaining economic headwinds worsened by Covid-19.
Volumes are likely to remain on the downside as inflationary pressures continue to weigh on disposable income.
This will be coupled with the negative effects of the Covid-19 pandemic that have already caused some disruptions to business operations across the world. Experts believe it will take time for the situation to normalise as well as to allow companies to recover from the lost sales during the Covid-19 crisis. During its FY20, Delta suffered sales volumes decline across segments as the market battled warning disposable incomes. Lager and sorghum beer volumes went down 42 percent and 25 percent respectively while sparkling beverages volumes fell 17 percent.
Brokerage firm, IH Securities, sees the beverages giant continue facing challenges in accessing foreign currency for its operations while sales volumes continue on a downward trend, falling by 14 percent.
Due to waning disposable incomes, the market is also seen downgrading to cheaper brands in search of value for money that will have an impact on overall volumes performance.
“Over and above the down trading, we anticipate volumes to remain weak in most product categories. Overall, we anticipate a 14 percent decline in volumes for FY21,” said IH in an earnings update.
“While we expect consumption to pick up as the situation “normalises”, it is unlikely this will cover lost sales during the nationwide lockdown which began in April.
“We anticipate volumes to stall further in the immediate future with potential for uptick in 2HY21 as production has been limited with efforts focused on combating the pandemic,” said IH Securities.
For businesses in Zimbabwe such as Delta, the pandemic worsened an already constrained economic environment characterised by foreign currency shortages. As such, for companies like Delta, it’s performance will continue to be hamstrung by challenges in acquiring forex and depressed agricultural output impacting raw materials.
Under such a challenging environment, analysts expect management may be forced to shift focus on traditional sorghum categories that require less foreign currency input costs as they assess the resilience and agility of their supply chains.
Said IH: “We anticipate the product mix to remain weighted towards the mainstream and economy brands as disposable incomes come under increasing pressure during the pandemic.”
However, despite the reduction in volumes, revenue is expected to increase 71 percent to $7,20 billion in FY21 from $4,19 billion in FY20 largely due to price increases owing to inflation.
While import-based input costs are expected to surge upwards as the local currency depreciates, EBITDA margins for FY21, are projected to grow to 37,43 percent driven by prices increases due to inflation and then beginning to moderate thereafter net attributable income is an growing 74 percent.
The beverages giant recently completed the acquisition of UNB in South Africa and this is expected to add to is earnings as the group benefits from foreign currency revenue as UNB is fully consolidated and translated at the interbank rate.
Online Reporter