Delta is looking strong

Turnover in excess of $300m for the 12 months to March 2010 helped Delta http://www.delta.co.zw/ meet most analysts' earnings expectations. In short we are drinking as much as we are making phone calls on Econet's mobile network! Econet recorded $362m in sales in the year ended February 2010.

The results which were released this week, reinforced the view that Zimbabwe's economy is very much back on track. In support of this Delta recorded a doubling of volumes in some of its lines. The return of previously discontinued lines such "shake shake" opaque beer returns Delta to its old self. Operating margins were 16%, management is happier with 18-20% and was confident that this will be achieved.

Like Econet, Delta is now pushing sales of over $30m every month. As long as the economy remains stable, Delta will maintain or even grow these revenues and is on course to paying a dividend in the interim period of 2011. Management did well to offload non-core businesses increasing the focus on volume growth and cost containment.

With a market capitalisation of $550m, Delta is one Zimbabwe's biggest companies. Profit after tax was $35m. I was expecting $47m. Too optmistic you might say! Unfortunately not everything went according to plan. The late commissioning of their new bottling plant, unreliable water and electricity supply cost the company in the second half resulting in the company failing to take full advantage of peak time demand. It is interesting to note that sales have remained strong going into April 2010. $37m was recorded.

What is exciting about Delta is how it has stood the test of time. This is why it is called a Blue chip stock. I will be the first to admit that i thought foreign beers had taken over and Delta's beers would never sell! If you thought so too, think again. Local beer volumes are growing and constitute more than 95% of the consumption in the country! Infact sorghum based beer constitutes the bulk of beer consumed in the country.

So it does look like, for any problem that comes its way, Delta have an answer. In the area of premium brands it has Peroni and Miller's, which compete with your Heineken and Windhoek respectively. Dont ask me how i know that.

All in all i would say Delta is worth keeping in any long-term portfolio. BUY on weakness. HOLD for solid long term returns and a dividend.