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Distell experiencing strong demand for cider in South Africa

Distell, which owns brands including Amarula and Savanna, says the balance sheet remained strong with a net debt position expected to be under R1 billion. Photo: Reuters

Distell, which owns brands including Amarula and Savanna, says the balance sheet remained strong with a net debt position expected to be under R1 billion. Photo: Reuters

Published Jan 21, 2022

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Distell Group Holdings, which is being acquired by international brewer Heineken International, said yesterday that “rampant demand” for Savanna and its core spirits brands was causing the glass shortages in South Africa.

The group said in a trading update that it continued to perform well in the six months to December 31 despite facing challenges of the pandemic, rising commodity costs, global supply chain disruptions, imported goods cost increases and glass shortages.

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In South Africa, the group’s largest market by revenue, government pandemic restrictions resulted in 25 fewer trading days during the six months versus 38 days lost in the previous six months ended December 31, 2020.

In addition, civil unrest in July in KwaZulu-Natal and parts of Gauteng caused about R100 million in damages to a distribution centre, where the majority of the insurance claim had since covered the losses incurred.

Operations were quickly re-instated and normalised within six weeks of the incident.

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Revenue during the six months increased by the mid-teens alongside low-teen volume expansion compared to the prior period.

In South Africa, despite a reduced trading period, the business was able to grow revenues in the low twenties alongside mid-teen volume growth.

Category performance was driven by an exceptional premium cider and RTD (ready-to-drink) growth with good performance across multiple spirits brands.

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In the rest of Africa, excluding BLNE countries (Botswana, Lesotho, Namibia and eSwatini), mid-single-digit revenue growth was recorded alongside volumes growing in the low-teens compared to the prior period.

This was largely driven by Mozambique, Nigeria, Zambia and Tanzania. Kenya posted a resilient performance, particularly over the peak season, despite prolonged domestic channel closures due to pandemic restrictions for the majority of the trading period, which account for 15 percent of domestic revenues.

The Africa business, including BLNE countries, saw revenues and volumes increase by low and high-single digits respectively, driven by Botswana losing almost a third of its trading period due to extended restrictions and stock supply issues in Namibia, which were being addressed and trading had been normalised.

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The international business recorded a single-digit revenue decline due to one of its largest revenue contributing regions, Taiwan, experiencing Covid-19 related on-consumption channel closures for half of the trading period.

South African port disruptions in July also hurt wine exports and performance in the period. Premium spirits continue to perform strongly across key markets, particularly with single malt brands and Amarula.

The balance sheet remained strong with a net debt position expected to be under R1 billion, aided by strong cash generation and trade receivables collection ahead of expectations during the festive season.

BUSINESS REPORT

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