ZIMBABWE LIQUIDITY CRUNCH

Delta builds war chest of cash in hand as buffer to cash crisis

EXECUTIVES at Delta Corporation, the Zimbabwean associate unit of Anheuser-Busch InBev, say the company is building a war chest of cash in hand and cash equivalents as it gears for further worsening of the financial services sector.

Investors in Zimbabwe are already moving away from monetary assets that are now deemed as risky owing to the liquidity challenges in the market, according to Old Mutual Zimbabwe chief executive, Jonas Mushosho.

Banks in the country have been grappling with cash shortages, while companies battle for payments of foreign sourced raw materials and other supplies. Dividend payments to foreign shareholders had also been affected.

Unpredictability

“The unpredictability of the financial services sector means that you cannot continue to rely on the banks going into the future. That space will be problematic… we are building a war chest going ahead in cash at hand,” said Mathlogonolo Valela, the executive director for finance at Delta.

The company closed the year to March 31 with $173.3 million (R2.35 billion) in cash and cash equivalents compared to $166m in the 2016 contrasting period. Dividends paid in cash stood at $49m after net cash investment of about $40m during the year.

Delta manufactures lager beers and the opaque sorghum based Chibuku as well as soft drinks under a bottling arrangement with The Coca-Cola Company. Overall revenue for the year declined 10 percent to $483m.

Although it has been cash generative, Delta had still been unable to pay its major foreign shareholders, Valela said, adding that the “small foreign shareholders have been paid” their dividends.

Profit for the year “attributable to owners of the parent” declined from $80m to $69.8m.

Alex Makamure, the company’s secretary, said it was better to pay for imported supplies than allocate all money cleared by the Reserve Bank of Zimbabwe to pay foreign shareholders.

Zimbabwean companies have to seek approval from the central bank – which clears applications using a strict priority list – to make foreign payments.

The company declared a 5.45 cents dividend for the period, a figure that is 16 percent up on the prior year.

Said Valela: “We are cash rich and we have reduced our need to depend on capex.”

Delta on Wednesday reported a 7 percent decline in lager beer volumes to 1.2 million hectolitres while soft drinks sagged 11 percent in addition to a further 3 percent fall in sales volumes for Chibuku. However, the value packs and products as well as the premium beer segment have remained resilient.

Pearson Gowero, the company’s chief executive, said the period under review “had so many hurdles” with conditions worsening in the quarter to December 2016.

The company declared a 5.45c dividend for the period, a figure 16% up on the prior year.