Weaker rand tops up Distell’s revenue

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Audrey D’Angelo

Distell lifted revenue by 11.9 percent to R15.9 billion in the year to June, helped in export markets by the weaker rand, the wine and spirits conglomerate said yesterday. This was despite a global slowdown and reduced consumer spending in many of its markets.

Headline earnings rose by 12 percent to R1bn, while operating profit increased 26.6 percent to R1.8bn. Normalised headline earnings rose by 14 percent and operating profit by 8.3 percent, which excluded the additional provision for excise duty in the previous year and the current year’s interest provision and purchase of Scottish whisky company Burn Stewart Distillers for £160 million (R3bn) in April.

Distell had provided R297.8m for additional excise duty on wine aperitifs last year as a result of tariff reclassifications. This year, a further R171.7m was allocated for interest payable on the duty.

Managing director Jan Scannell said the results had been helped both by good sales and the weaker rand.

“Steep increases in excise duties and marketing expenses were partially offset by foreign currency conversion gains. However, we also saw the benefits of improved efficiencies in the business and the normalisation of certain raw material input costs.”

Operating costs had risen by 10.3 percent. Excluding the previous year’s provision for additional excise duty, operating expenses rose by 13.1 percent, while the net operating margin slipped from 12.1 percent to 11.2 percent.

Ready-to-drink brands and ciders delivered excellent growth in several African markets, as well as locally. New distribution partners for Savanna cider had been appointed in the UK and the cider to supply it was now produced in Belgium.

The continued demand for whiskies; the growth of Bisquit cognac, acquired by Distell in 2009; and Amarula Cream’s continued good performance had all helped to offset the decline of the brandy segment. As a result, Distell’s global spirits business had been able to show reasonable value growth. The wine portfolio had also delivered solid value growth.

Scannell said although bulk wine accounted for 64.8 percent of South Africa’s wine exports for the year, which was in line with global trends, Distell’s focus remained on packaged wines.

“Despite the more competitive environment, we increased our share of South Africa’s packaged wine exports to 27.3 percent. This is a most encouraging development, as not only do packaged wines offer bigger and more stable margins, they are also critical in protecting brand equity.”

Distell rose 0.09 percent to R123.31 on the JSE yesterday.

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