• Delta requires just US$392.5 million in second half revenue to surpass US$1 billion again.
• Six months of sales have reached 96% of Delta's previous US dollar revenue peak in FY2013.
• Underlying earnings strengthened, although rising costs, regional losses and unresolved tax assessments remain significant constraints.

Harare- Delta Corporation is heading towards another US$1 billion revenue year after generating US$607.5 million during the six months ended 30 September 2026, an 18% increase from the corresponding period.

The beverages manufacturer requires only US$392.5 million during the remaining six months to surpass the milestone, considerably below the US$577.6 million generated during the previous financial year's second half.

With the festive trading season traditionally supporting stronger beverage consumption and demand already exceeding production capacity across selected beer brands, Delta enters the second half with substantial room to sustain its billion dollar revenue status. The greater commercial challenge is converting the expanding sales base into stronger profitability as rising production costs and regional losses continue weighing on operating margins.

According to Delta's unaudited half year financial results, accompanied by Chairman Todd Moyo's statement, operating income increased 13% to US$112.2 million, while earnings before interest, tax, depreciation and amortisation reached US$126.8 million, also increasing 13%. Profit after tax rose 6.7% to US$80.1 million, with headline earnings per share advancing 15% to US5.91 cents. Stronger domestic demand was supported by mining activity, improved agricultural output and sustained foreign currency inflows, while United States dollar transactions accounted for 97% of domestic gross sales, compared with 92% a year earlier.

Delta's historical revenue performance places the latest growth in perspective. During the financial year ended March 2013, the company generated US$631.3 million, its highest annual revenue during the earlier United States dollar reporting period before 2019. Revenue subsequently moderated as liquidity constraints affected consumer spending, reaching US$602.2 million in FY2014 and US$483 million in FY2017 before recovering to US$572.2 million in FY2018. The US$607.5 million generated during the latest half year represents approximately 96% of the FY2013 peak, indicating that Delta has nearly matched six years of earlier revenue growth and subsequent contraction within just six months of current operations.

The comparison illustrates the scale of the company's expansion, although the figures represent nominal United States dollar revenue across different economic and operating environments. Inflation, changes in the group's business portfolio and differences in reporting currencies limit direct conclusions about real growth. Delta reported in Zimbabwe dollars during part of the intervening period before adopting the United States dollar as its functional currency from October 2023, meaning historical revenue comparisons require attention to accounting and currency translation effects.

More recent financial results provide a clearer view of Delta's recovery. The group reported revenue of approximately US$536.9 million in FY2023, US$767.9 million in FY2024 and US$807.5 million in FY2025 before reaching US$1.092 billion in FY2026. The latest annual figure represents an increase of approximately 35.2% from FY2025, supported by stronger domestic consumption and the contribution from the expanded beverages portfolio. Revenue has more than doubled against the FY2023 reported figure, although the earlier periods require qualification because of changes in the functional currency and the basis of financial reporting.

Repeating the US$577.6 million generated during the previous financial year's second half would lift FY2027 revenue to approximately US$1.185 billion, representing growth of 8.5% over FY2026. The company could also record a decline of approximately 32% in second half revenue from last year's level and still surpass US$1 billion. These calculations establish considerable headroom against the milestone, with the final outcome dependent on festive demand, consumer purchasing power and the availability of products where manufacturing capacity remains constrained.

The earnings performance requires a distinction between reported profit growth and the underlying contribution from operations. The comparative period included a US$6.86 million fair value gain arising from the remeasurement of Delta's investment in Schweppes. Excluding that nonrecurring gain, prior year profit before tax would have amounted to approximately US$97.9 million, compared with US$115.3 million in the current period. This implies adjusted growth of 17.8%, demonstrating stronger underlying earnings expansion than the reported increase in profit after tax suggests.

Lower finance charges and favourable exchange movements also supported profitability. Finance costs declined from US$3.06 million to US$1.25 million, while the group recorded a US$2.6 million exchange gain against a US$516,000 loss in the comparative period. Income tax expense increased 18.6% to US$35.2 million, taking the effective tax rate to approximately 30.5% from 28.3%. The interaction between these items contributed to the difference between operating earnings, adjusted profit before tax and the reported increase in profit attributable to shareholders.

Operating costs remain a more persistent commercial concern. Total operating expenditure increased 19.5% to US$495.3 million, exceeding revenue growth of 18.1% and reducing the group operating margin from 19.4% to 18.5%. Delta identified higher fuel, freight, PET packaging, utilities and imported raw material costs as the principal pressures, with a significant portion absorbed to preserve consumer affordability. The reduction in margins indicates that stronger sales volumes are not yet generating proportional gains in operating profitability, placing greater emphasis on manufacturing efficiency and the cost of supplying the expanding market.

Lager beer remained the largest contributor to group earnings, with volumes increasing 13% to 1.75 million hectolitres. Segment revenue rose 19.5% to US$245.3 million, supported by strong mainstream demand and improved availability of premium brands, including Zambezi Lager. Operating income increased 7.7% to US$80.3 million, reducing the division's operating margin from 36.3% to 32.7%. The decline demonstrates the extent to which rising operating costs have absorbed the benefits of stronger demand, particularly as selected brands and packaging formats continue exceeding available domestic production capacity.

Delta has been supplementing local beer supply through imports from regional sister companies while undertaking investments to improve domestic manufacturing capacity. Upgrades to brewing and filtration facilities at Southerton are expected to increase production throughput, while the replacement brewhouse at Belmont in Bulawayo is scheduled for commissioning in December 2026. An additional packaging line is planned for the final quarter of the financial year, alongside investment in returnable glass, crates and distribution infrastructure. These projects address established supply shortages, creating an opportunity to capture additional domestic demand and improve production efficiency.

The potential earnings benefit depends on commissioning schedules and the economics of replacing imported supply with locally manufactured products. Greater domestic throughput could improve utilisation and reduce selected distribution and procurement costs, although Delta has not disclosed the margin difference between imported and locally brewed beer. The investment programme will therefore be assessed through additional production volumes, operating efficiency and the extent to which the lager division recovers the margins lost during the latest half year.

Zimbabwean sorghum beer volumes increased 19% to 2.67 million hectolitres, with Chibuku Super recording growth of 27%. The broader sorghum beer segment, which includes operations in South Africa and Zambia, generated US$153 million in revenue, increasing 15%, while operating income grew 34% to US$18.4 million. Its operating margin improved from 10.3% to 12%, reflecting stronger domestic volume absorption and manufacturing efficiency. The division's performance reinforces the contribution of affordable beverages to Delta's earnings, supported by activity in mining and agricultural communities.

The nonalcoholic beverages division recorded 5% volume growth to 1.61 million hectolitres, while revenue increased 12.5% to US$152.6 million. Performance differed across categories as sparkling beverage volumes declined 2% following price adjustments associated with the January 2026 VAT review and higher packaging costs. Consumers increasingly shifted towards smaller, more affordable 350ml PET packs, while Schweppes recorded volume growth of 29% through improved distribution and product availability. Maheu volumes declined 13% because production capacity remained insufficient to satisfy demand for the Shumba brand.

Despite these constraints, the division's operating income increased from US$3.1 million to US$10.2 million, lifting its margin from 2.2% to 6.7%. Delta paid approximately US$15 million in sugar tax during the half year, unchanged from the comparative period, with the company absorbing a substantial portion of the charge to maintain competitive prices. The cost remains material to the profitability of sparkling beverages and cordials, particularly as regional imports and products using alternative sweeteners intensify competition.

African Distillers delivered stronger domestic performance, with total volumes increasing 35%, supported by growth of 65% in wines, 39% in ready to drink products and 24% in spirits. Revenue from the wines and spirits segment increased approximately 40% to US$56.5 million, while operating income rose 21% to US$7 million. The operating margin declined from 14.2% to 12.3%, reflecting higher costs despite stronger sales. Additional packaging capacity is expected to be commissioned during the second half to address existing supply constraints.

The regional sorghum beer operations continued weakening consolidated profitability. United National Breweries in South Africa recorded a 22% decline in volumes following distribution disruptions, weak consumer spending and operating difficulties in selected markets. National Breweries Zambia reported a 17% decline amid competition from unregulated alcoholic beverages and weaknesses in distribution. Both subsidiaries remained loss making, although the Zambian business reported improved margins and a narrowing of losses as packaged products increased to 95% of volumes. Restoring sustainable profitability will depend on stronger distribution networks, product availability and consistent sales growth.

Alongside these operational developments, Delta continues contesting approximately US$97 million in additional tax assessments issued by the Zimbabwe Revenue Authority against Delta Beverages and African Distillers for periods between 2019 and 2024. The assessments cover foreign currency income tax, VAT, interest and penalties, with disputes concerning calculation methodologies, apportionment and the currency treatment of historical obligations. The Supreme Court confirmed the validity of assessments relating to earlier periods, while disagreements over their quantification and other matters remain before the relevant courts.

Delta had paid US$22.8 million towards the disputed assessments by September 2026 under the pay now, argue later principle. The group also holds United States dollar denominated Treasury bills received from the Reserve Bank in settlement of legacy obligations, carried at approximately US$8 million, which it hopes the government will accept against any liability ultimately determined to be payable. The board has not established the likely outcome or timing of the proceedings, leaving uncertainty over additional cash requirements that could arise.

The unresolved tax exposure comes as Delta accelerates manufacturing investment. Capital expenditure increased to US$47.2 million from US$20.5 million in the comparative period, comprising US$37.4 million for expansion and US$9.9 million for maintenance. Outstanding capital commitments reached US$158.1 million, including approximately US$60 million under existing contracts. The investment programme is intended to remove production bottlenecks and strengthen domestic supply capacity, requiring sustained operating cash generation as projects move towards commissioning.

Cash generated from operations before working capital movements increased to US$131.5 million, while net operating cash flow reached US$105 million. Delta ended September with cash and bank balances of US$71.5 million against borrowings of US$15.3 million, leaving net cash of approximately US$56.2 million. The group also declared an interim dividend of US2.4 cents per share, increasing 20% from the previous year. Its liquidity position provides capacity to support ongoing investment, although the scale of capital commitments and unresolved tax assessments creates competing potential demands on future cash resources.

Delta reported paying US$193.3 million in various taxes in Zimbabwe during the half year, an increase of 31% from US$147.5 million. The amount includes taxes collected and remitted to government, including VAT and excise, alongside the company's own obligations. The growth in tax remittances reflects the scale of operations and fiscal charges associated with the expanding beverages market, while the outstanding assessments underline the financial consequences of disputes over historical tax treatment.

Equity Axis takes the view that Delta's revenue trajectory has substantially strengthened the likelihood of another billion dollar year, with the remaining US$392.5 million comfortably below its previous second half performance. The company's historical growth also demonstrates the scale of its expanding revenue base, with the latest six month turnover approaching the US$631.3 million annual peak recorded during the earlier dollarisation era. The more consequential challenge is improving profitability as operating costs increase faster than revenue and regional losses continue absorbing resources.

The manufacturing investment programme provides an opportunity to strengthen earnings conversion by increasing local production and improving utilisation. Timely commissioning at Southerton and Belmont should reduce existing supply constraints, although the financial benefit will depend on operating efficiency and the extent to which higher throughput improves margins. Restoring profitability in South Africa and Zambia would provide an additional source of earnings growth, while the unresolved tax dispute requires continued liquidity discipline.

Another US$1 billion revenue year is firmly within reach, with annual turnover potentially approaching US$1.2 billion if second half performance sustains the previous year's momentum. The defining commercial outcome will be the additional operating profit generated from that revenue, particularly as Delta commits substantial capital to manufacturing expansion. Higher returns will depend on stronger cost absorption, improved regional execution and the conversion of existing domestic demand into sustainable cash generation.

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