Delta: Third Quarter Business Update

The Company hereby publishes a business update for the third quarter ended December 31, 2022.

OVERVIEW OF THE BUSINESS ENVIRONMENT

The national economy experienced moderate growth in 2022 due to high inflation, multiple and unstable exchange rates, reduced agricultural production, and pass-through effects of rising global inflation coupled with COVID-related supply disruptions -19 and the conflict between Russia and Ukraine. The country, however, benefited from increased mining activities and remittances from the diaspora and public spending on infrastructure.

The third quarter saw a slowdown in inflation and exchange rate volatility in response to some policy interventions, resulting in increased foreign currency transactions and limited Zimbabwean dollar liquidity.

Consumer spending remains high, benefiting from stable US dollar prices, improvements in wages and salaries in various sectors, and a buoyant informal sector, particularly in mining.

In South Africa, the economy was hit by power outages, rising unemployment and violent crime, exchange rate volatility, and rising fuel prices.

Zambia’s economy is stable, although consumer spending is constrained.

VOLUME PERFORMANCE

Lager beer

Lager beer volume grew 17% in the quarter and 18% in the nine months compared to the same period last year. The supply of products remained stable although there were intermittent gaps derived from power cuts, water supply, imbalances in the demand and supply of brands and packaging. We continue to improve our production capabilities, which are supported by glass bottle injection and better asset care.

The business continues to invest behind the brands and to focus on market-oriented activities. The installation of an additional packaging plant is scheduled for commissioning in the first half of 2023.

Sorghum beer

Sorghum beer volume in Zimbabwe grew 11% in the quarter compared to a year ago and increased 12% in the nine months. The category continues to benefit from increased brand activities as we celebrate the 60th anniversary of the Chibuku brand. The Super Chibuku

The banana flavor, which launched in June 2022, has excited the market and will see an increase in supply once packaging capacity and supply chain bottlenecks are fixed. Installation of additional production capacity at the Harare brewery is in progress for commissioning during the first half of 2023. There are ongoing efforts to optimize available PET production capacity in countries in the region and to reactivate the Scud package. to cover supply gaps.

Natbrew Zambia continues to pick up volumes, recording 11% growth over nine months, which includes some regional exports. There are opportunities to grow returnable packs and flavor offerings.

Volume at United National Breweries South Africa was flat during the quarter but grew 21% over the nine months, reflecting disruptions to operations stemming from power outages and reduced market service by brewers. resellers and distributors in response to escalating fuel prices.

There is encouraging uptake of Chibuku Super, which is being seeded on the market ahead of planned investment in local production capacity in the next fiscal year.

fizzy drinks

Soft drink volume grew 5% in the quarter and 14% in the nine months. Supply of PET containers remains tight and will be addressed by investment in additional capacity expected in the current quarter. The supply of returnable glass containers was affected by the delay in the receipt of glass bottles and some interruptions in production operations due to power and water outages.

The business continues to regain market shares despite currency-related price distortions.

Wines and Spirits

African Distillers Limited (Afdis) reported volume growth of 10% in the quarter and 11% in the nine months. The supply of ciders was constrained by a regional shortage of glass bottles. The company started up a new PET line for the packaging of liquors and began the local fermentation of ciders.

Associated Entities

Volume at Schweppes Holdings Africa was flat over the nine months as it was affected by a fruit juice shortage earlier in the year. Business performance continues to be affected by currency-related impediments at formal retail outlets, which is the business’s primary trading channel.

Supply of Minute Maid brands was affected by a prolonged plant outage.

Nampak Zimbabwe continues to benefit from volume recoveries in key beverages and other consumer sectors. There are some interruptions in production stemming from power outages.

FINANCIAL PERFORMANCE

Group revenue grew 44% in the quarter and 53% in the nine months on an inflation-adjusted basis compared to 407% and 419% growth in the quarter and nine months, respectively, in cost terms historical. This reflects volume growth and price based on replacement cost.

The Zimbabwean businesses recorded a significant increase in the proportion of foreign currency sales during the quarter to over 70%. There was a corresponding increase in purchases settled in foreign currency, as the economy dollarized.

PANORAMA

The operating environment in Zimbabwe, while stable, remains challenging as the country heads into general elections scheduled for later in the year. There are uncertainties posed by the COVID-19 pandemic, rapid policy changes, and the polarized political environment.

The country has opportunities to benefit from rich mineral resources and strong commodity prices. The Group remains focused on exploiting the opportunities that arise from activities that generate aggregate demand, such as infrastructure development projects, mining activities and remittances from the diaspora.

The financial result in F23 could be affected by tax settlements in foreign currency derived from the differences in the interpretation of the legislation on the currency of payment of certain taxes.

Capital investment projects are progressing as planned and are expected to contribute to business performance in the next financial period.

by order of the board

Ms. F. Musinga

company secretary

19 January 2023