Drought in the Western Cape poses a real risk to the supply of grapes and wine in the medium term and thus to the health of Distell.
“The current 38.1percent reduction in water usage as of June 2018 in the Western Cape has been achieved by accelerating the water management programme through demand reduction management and new water-saving initiatives.
"Certain water-intensive production activities have also been relocated to areas with sufficient water supply,” the group said on Friday, while presenting its results for the year to end June.
African markets outside of South Africa delivered excellent results, growing revenue by 19.5percent on sales volumes which were up by 7percent, largely driven by the inclusion of KWA Holdings in Kenya, which was acquired in April 2017.
Overall the group reported a 10.4percent increase in revenue to R24.23billion on 4.6percent higher volumes.
Revenue excluding excise duty grew by 7.7percent. Profit for the year was up by 28.6percent to R1.67bn, up from R1.3bn last year.
Headline earnings per share from continuing operations declined by 6.3percent to 669.9cents a share, down from 714.8c last year.
Earnings before interest, tax, depreciation and amortisation (Ebitda) was up by 20.2percent to R3.10bn, up from R2.57bn.
The board declared a gross cash dividend of 230c a share, to take the total dividend for the year to 395c.
Distell produces brands like Amarula, 4th Street, Hunter’s, Klipdrift, Nederburg, Richelieu, Savanna, Viceroy, and JC Le Roux.
Chief executive Richard Rushton said Distell had performed well with strong revenue and Ebitda growth in a tough domestic economy and increased competition where they grew their competitive position in all three categories.
In South Africa, domestic market revenue increased by 10.1percent and sales volumes rose by 4.4percent, while the economy continued to show low gross domestic product growth against increased costs of living placing pressure on consumer disposable incomes.
The group’s ready-to-drink portfolio delivered strong revenue and volume growth, led by Savanna and Bernini in the face of increased competition and managed to grow market share in the period.
“Exceptional gin volume growth continues at 29.3percent alongside growth of 43.6percent from vodka following the acquisition of the premium Cruz vodka brand during the previous financial year,” the group said.
The wine portfolio showed revenue growth of 7.4percent.
Going forward the group said that there are still risks facing the domestic economy in the short term, with consumer income and spending under pressure and rising poverty and unemployment levels going into 2019.
“The recent volatility of the rand, higher grape prices as a result of the Western Cape drought and water shortages presents additional challenges to the business in the short to medium term,” the group said.
- BUSINESS REPORT