Tougher times fail to dampen Distell spirits

Distell, which reported its annual results yesterday, showed its resilience to global contraction in spending by reporting a rise in revenue of 14,7% to R9,4bn on a sales volume increase of 6,9% for the year to June.

Ciders such as Savanna and Hunters, and ready-to-drink products were the stars, growing sales 6,7%, with sales in SA up 4% overall despite shortages in packaging and carbon dioxide as well as capacity limitations at Distell's plants.

Revenue from Africa rose 27,7% on sales volume growth of 24,5% as countries outside the Botswana, Lesotho, Namibia and Swaziland region contributed 43,5% to revenue growth.

International businesses contributed 20% of the group's revenue, up from 18% last year as sales volumes, excluding Africa, rose 13,4%.

Spirit volumes grew 10,8%, wine sales grew 12,6% and ciders 35,2%. As a result, international revenue grew 23,7%.

“We are encouraged by opportunities on the international front and in Africa, where we have established strong networks, and trading and distribution alliances with key partners,” MD Jan Scannell said yesterday.

“We were particularly encouraged by the gains achieved by JC le Roux and Drostdy-Hof on the continent, while cider is taking root in many African countries,” he said.

The group's local wine sales delivered a profitable volume growth of 2% in a fragmented and competitive market. The newly repackaged Nederburg garnered greater support in Germany, its biggest market after SA, and was now one of the top 10 wine brands in the German non-discount retail sector.

Two Oceans and Obikwa had delivered good growth in Canada to retain their leadership of the South African wine category.

Distell saw its spirits portfolio, which includes Three Ships whisky and Count Pushkin vodka, grow volumes 2,1% locally, driven by the growth of key brands in the brandy, whisky and liqueur categories.

“Notable performers were Richelieu and Klipdrift, with Klipdrift Gold in particular showing impressive gains,” Scannell said.

While the white spirits market remained under pressure, Distell brands retained their market share.

The group's profit surged 12,7% to R952m, while headline earnings were up 20,9% to R941,9m.

Earnings per share, including net other gains, grew 11,8%. A dividend of 132c, an increase of 21,1% on last year's final dividend, was declared.

Scannell said trading income had grown 19,7% because of the good revenue growth, as well as the benefits derived from improved efficiencies. However, although people were drinking less, the group was investing heavily to maintain market share.

The group's capital expenditure amounted to R383,3m, of which R176,8m was spent on the replacement of assets and a further R206,5m on the expansion of cider and spirit production capacity, as well as the refurbishment of the Wadeville plant.

“We are investing in marketing and agency structures that promote our brands because it is fairly difficult market with high inflation and interest rates,” Scannell said.

Source: Business Day

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