Weak rand helps Distell lift revenue while push into Africa gathers pace

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Audrey D’Angelo

Despite difficult economic conditions worldwide, the weakness of the rand helped sales by wine and spirits group Distell in international markets during the six months to December last year, resulting in revenue rising 15 percent year on year to R9.9 billion.

The company’s new chief executive, Richard Rushton, said this was achieved despite “muted global consumer spending associated with the protracted economic uncertainty”.

However, looking to the future, he said Distell’s ongoing investment to enhance its product range, improve distribution networks and strengthen operations in Africa, in particular, was “crucial in priming the company for focused global growth”.

The company declared an interim dividend of R1.54 a share from R1.52 last year.

Operating profit, normalised to exclude the effect of acquiring Scottish whisky producer Burn Stewart Distillers in April last year, rose by 13.4 percent while normalised earnings a share were 8.5 percent higher.

Rushton said the domestic market had been “extremely challenging” with consumers hit by rising inflation, higher fuel prices and high personal debt.

Despite this, local revenue rose, although only by 5.2 percent, with sales volumes up by 3.1 percent. Growth in the domestic market was helped by the popularity of cider, with strong growth in sales of the Hunter’s and Savanna brands.

Although sales of whisky grew impressively, this was not sufficient to offset a decline in sales of brandy. Rushton said this had continued despite a range of marketing initiatives and packaging upgrades that had helped sales of its premium and speciality brandies.

However, international sales of group products, including whisky in markets including other African countries, rose in volume by 12.7 percent while the weak rand lifted revenue in these markets by 48.9 percent.

The company was investing significantly to strengthen management and operational capabilities and expanding a well-resourced business unit devoted to maximising opportunities in Africa, Rushton said.

A new bottling facility had been opened in the Ghanaian capital, Accra, and the group had also invested in a new project in Anambra in Nigeria.

Rushton said that in addition to these developments, the company was achieving success in Zimbabwe and Angola.

“We continue to partner with local players as far as possible to capitalise untapped market demand across the continent.

“These ventures are being structured not only to build well-established brands but to look at the viability of local market preferences.”

Net financing costs rose to R110.2 million as a result of increased borrowing, while total assets increased by 46.9 percent to R16.1bn. But the group remained in a strong financial position, Rushton said.

Trading conditions were expected to remain tough but, “with the company’s diversified portfolio of strong brands, the recent acquisition of Burn Stewart Distillers and our investment in Africa, we are confident of delivering long-term growth”.

The shares lost 1c to R139.


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