Distell growth slows on consumer woes

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Distell Independent Newspapers Distell operation in Cape Town.

Johannesburg - Distell’s second-half sales growth halved to about 2 percent by volume, compared with the first six months of the fiscal year, Richard Rushton, the managing director of South Africa’s biggest wine and spirits producer, said by phone.

“The outlook for trading remains challenging in South Africa,” Rushton said.

“There’s not much cause for a change in view at this point.”

The slowdown in the second half ended June 30 held back full-year volume expansion to 3.1 percent as drinkers cut back on discretionary spending in the company’s home market.

The sold volume of Distell’s wine brands such as Nederburg showed better growth in the second half, while sales of brandy such as Klipdrift “pulled back performance,” he said.

The company is trying to boost whiskey sales to offset this decline.

South African retailers are struggling as inflation above 6 percent and unemployment of more than 25 percent force shoppers to cut down on luxury purchases.

Retail sales were unchanged in June, the worst performance since December 2009.

Distell’s shares fell 1.8 percent to 134.59 rand at the close in Johannesburg on Monday, the lowest price in more than a month.

That valued the company at 29.8 billion rand.

Full-year operating profit increased 23 percent to 2.2 billion rand, the Cape-Town based company said in a statement today.

Revenue grew 13 percent to 17.7 billion rand, while the total dividend was little changed at 3.37 rand per share.

Distell put most of its 691.8 million rand in capital expenditure in the year into increasing local production capacity in the continent outside its domestic market.

The company will focus on adding production and distribution in countries such as Angola, Nigeria and Ghana to “withstand steep taxes and other costs,” Rushton said. - Bloomberg News

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