Delta invests US$13m in agric sector

LIVINGSTONE MARUFU

Delta Corporation Limited, Zimbabwe’s largest brewer, has committed approximately US$13m to the 2024/2025 summer cropping season. This strategic investment is aimed at reducing raw material costs and empowering outgrowers through targeted support.

Delta’s agricultural portfolio primarily focuses on maize, sorghum, and barley. While maize and sorghum are cultivated during the summer, barley production is reserved for the winter season. The company relies heavily on contract farming for maize and collaborates with outgrowers to meet its sorghum requirements.

Delta CEO Matts Valela recently highlighted the company’s optimism for the upcoming season, citing favorable rainfall projections.

Speaking to Business Times, Valela emphasized that the firm anticipates reduced input costs due to improved weather conditions.

 “We consume between 50,000 and 60,000 tonnes of maize annually, and we aim to secure a significant portion of this through contract farming. For sorghum, we work with over 12,000 outgrowers across various communities to produce the 15,000 tonnes needed for processing. We typically invest 30% to 50% of the selling price, or about US$33.14 per tonne, as funded inputs for these crops,” said Valela.

Valela acknowledged that Delta’s agricultural investments are typically higher during the winter cropping season.

The 2023/2024 summer season was declared a disaster by the government due to poor agricultural output, which heavily impacted Delta’s operations. The resulting drought led to supply constraints, escalating the costs of key raw materials such as maize, sorghum, and barley.

“As a converter of cereals into beverages, droughts pose significant challenges for Delta. Reduced availability of maize and sorghum directly impacts our production, while insufficient water for barley cultivation drives up costs. Despite these challenges, we chose not to pass these increased costs onto our consumers. Instead, we absorbed them, banking on La Niña conditions to restore a more sustainable cost base,” Valela explained.

The adverse weather conditions and economic pressures had a noticeable impact on Delta’s financial performance. Sorghum beer volumes in Zimbabwe declined by 11% for the six months ending September 30, 2024, with domestic volumes falling 3%. The drought particularly affected rural markets, where reduced disposable incomes and rising input costs made the sorghum beer category more vulnerable.

Nevertheless, Delta posted an 11% increase in group revenue to US$389 million for the same period, compared to restated prior-year figures. Adjusted for currency conversion distortions, the underlying revenue growth was approximately 3%. Profit after tax surged 85% to US$41.053 million, up from US$22.13 million in the comparable period.

The company noted a decline in domestic sales transacted in foreign currency, dropping from 88% in the prior year to 77% in 2024. This shift was attributed to the introduction of the Zimbabwe Gold (ZiG) currency, stricter dual pricing regulations, and increased formal sector sales, which predominantly operate in local currency.

Delta remains optimistic about the 2024/2025 summer cropping season. The company is leveraging favorable rainfall forecasts to strengthen its partnerships with contracted farmers and outgrowers. This proactive approach is expected to enhance productivity and stabilize input costs.

Looking ahead, Delta aims to capitalize on increased consumer spending, supported by recent expansions in production capacity. The company is also focusing on activities that drive aggregate demand while positioning itself for long-term growth in a challenging economic environment.

Through its US$13m investment in agriculture, Delta underscores its commitment to ensuring sustainable raw material supplies, supporting local farmers, and maintaining price stability for its consumers. These efforts not only safeguard the company’s operations but also contribute to broader economic resilience.