Distell to grow its African footprint

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Nompumelelo Magwaza

DISTELL was forging ahead with its African growth strategy, encouraged by strong volume growth especially in the sub-Saharan African markets, the Cape-based producer and marketer of wines and spirits said yesterday.

Domestic volumes, including brands such as Hunter’s, Amarula and Three Ships, grew 2.6 percent despite challenging economic conditions.

Recently the group has began implementing physical operations in regions such as Ghana, Nigeria and Angola.

African operations have achieved a 20 percent rise in revenue for the year to June, contributing 49.6 percent to the group’s total revenue.

“This was despite several disruptions of trade-intensified competition from the major global players and a stepped-up presence of cheap Indian imports, as well as the imposition of high import duties in several countries,” Distell’s managing director Richard Rushton said.

The group had also acquired a 26 percent stake in Kenya’s KWA Holding East Africa Limited following the passing of legislation in July to permit its privatisation.

Rushton said this gave Distell an opportunity to expand into the east African market.

“It’s early stages of investment of infrastructure in Africa but… they are ambitious plans,” said Rushton.

The overall group’s revenue added 12.8 percent to R17.7 billion with sales volumes up 3.1 percent. Operating costs rose by 12.7 percent to R15.7bn with trading profit up 13.8 percent to R2bn. With the inclusion of Burn Steward Distillers and the remeasurement and reversal of a contingent purchase consideration, headline earnings rose 40.4 percent to R1.5bn.

However, normalised headline earnings and operating profit grew by 1.7 percent and 8.1 percent, respectively.

Locally, Distell had managed to maintain its 21 percent value share of the total liquor market despite the entry of competitors and new products.

Distell, like its competitors, had difficulties achieving growth in international markets, especially in Europe.

“Nonetheless, revenue growth was impressive at the back of [the] rand’s devaluation which helped to boost revenue,” Rushton said.

Distell would also refocus some its business into whiskey offering as the brandy market slowed down globally. He said high demand for whiskey had offset poor demand for brandy.

Distell shares sank by 1.76 percent to close at R134.59 on the JSE yesterday.

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