LEADING research firm Inter-Horizon (IH) Securities has projected that revenue for blue-chip Delta Corporation will grow by 10% in the financial year 2024 to US$781 million, buoyed by additional capacity.
The group commissioned a lager beer glass packaging line at its Southerton brewery, a polyethylene terephthalate (PET) packaging line at Graniteside, and the Chibuku Super plant and packaging line at Harare brewery.
Delta has continued with its capital expenditure campaign, having spent an indicative US$46 million within the first half of its financial year on capacity upgrades.
The business is expected to benefit from this additional capacity, improving product supply on the market and operational efficiencies for several lines.
New plants that have been launched have started alleviating supply constraints within the first half of 2024. The lagers packaging plant has increased aggregate capacity from 2,2 million hectolitres to 2,9 million hectolitres per annum.
The new sparkling beverages packaging plant has an annual capacity of 0,7 million hectolitres, while the Chibuku packaging line has a capacity of 1,3 million hectolitres.
“For forecasts to remain relevant in the present inflationary environment, we have shifted to a USD (United States dollar)- based valuation of the business,” the securities firm said in its analysis of Delta’s update for the half-year ended September 30, 2023.
“We believe that revenue for Delta will grow 10% in the financial year 2024 to US$781 million from the expected volume uplift.
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“Our view is that EBITDA (earnings before interests, taxes, depreciation and amortisation) margins will likely remain flat at 24% in the financial year 2024 with a forecasted net income of US$131 million.”
Revenue for the half year ended September 30, 2023 grew 9% to US$376 million, while indicative earnings before interest and taxes in US dollar terms saw a 10% increase to US$85 million.
EBITDA margin slowed marginally from 27% in the first half of 2024 to 25% in the period under review. The group registered basic earnings per share of US$0,0560 and subsequently declared an interim dividend of US$0,01 per share.
“Going into the festive season, seasonal demand is expected to propel volumes for the group, which are notably trending above four-year averages for key segments,” IH said.
“However, bottom-of-the-pyramid liquidity into 2024 is likely to be impacted by the foreseen negative impact of El Nino conditions on the agricultural sector and moderating hard commodity prices on international markets.
“Given the volatile environment, management has highlighted that focus will be on protecting the balance sheet, optimum resource allocation, generating positive cash flows to fund the ongoing capital projects, and turning around the regional operations.”
The first quarter of 2024 for Delta was encompassed by rapid devaluation of the local currency and a notable uplift in inflation.
Policy interventions by authorities, however, resulted in more stable exchange rates, tight local currency liquidity and increased use of foreign currency for domestic transactions in the second quarter of 2024.
Consumer spend was buoyed by stable US dollar pricing, improvements in wages and salaries and election-related financing.
In the South African market, the researchers said consumers were impacted by weakened purchasing power, while in Zambia, inflation had started to pick up in response to a depreciating currency, removal of subsidies, and maize shortages.
Group volumes for Delta remained strong as the company leveraged new investments into capacity.
Lager beer volumes grew 13% year-on-year to 1,17 million hectolitres, despite supply challenges for certain brands and packs.
The sorghum beer volume in Zimbabwe grew 4% year-on-year to 2,17 million hectolitres with market share retreating slightly from 94% to 93%.
Sorghum beer in the Zambian market saw continued recovery with volumes growing 67% to 0,65 million hectolitres while volumes in the South African market remained flat at 0,78 million hectolitres.
Operations at United National Breweries in South Africa reached break-even point within the period.
The sparkling beverages volume grew by 17% compared to the same period last year, with the volume recovery accelerating in the second quarter.
Market share in the segment posted a slight recovery from 63% to 65%.
African Distillers Limited aggregate volumes grew 10% year-on-year, benefitting from improved product availability, while Schweppes volumes grew 7% despite supply shortages of bottled water and Minute Maid.
The proportion of foreign currency sales in the period was over 80% as the economy pivoted more towards US dollar transactions.
