COVID-19 trade disruption impairs Distell’s trading year by 20%

SOUTH AFRICA – Distell Group, producer and marketer of wines, ciders, spirit and ready-to-drinks beverages (RTDs) has reported a 14.6% decline in revenue to R22.4 billion (US$1.325m) on 22.5% lower volumes for the 12 months ended 30 June 2020.

According to the South Africa based global drinks company, the results show a significant resilience in its operating performance and balance sheet despite unprecedented challenges which led to a fall in revenue, EBITDA and headline earnings as well as a temporary suspension of dividends.

The restrictions imposed on the sale of alcohol in South Africa reduced its trading year by nearly 20% as it had a ripple effect on other markets.

The group’s profit in the period under review just more than halved to R394.6m.

Its Headline earnings per share, the main profit measure in South Africa, came in at 235.3 cents compared with 652.9 cents a year earlier, thus a 64% drop. Its EBITDA declined by 23.0%.

Commenting on the results, Distell’s Group CEO, Richard Rushton, said, “The resilience of our business and culture was severely tested during the pandemic and I’m proud of the way we are responding.

“We acted fast in strengthening our balance sheet and placed the well-being and safety of our staff, key suppliers and customers first.”

Domestic performance

Tough operating conditions resulted in domestic revenues decreasing by 18.2% while volumes declined by 25.0%.

The spirits segment however recorded some growth in South Africa after the lifting of the first prohibition of alcohol sales while gin and vodka brands performed well in a competitive environment in the period under review.

The broader wine category was also impacted by restrictions although the category saw a resurgence in consumer purchases following the lifting of restrictions.

Increased competition and discounting in a growing ready-to-drink (RTDs) category continued. However, Savanna continued its strong momentum against competitors, validating our focus on building brand equity over aggressive price discounting.

New innovations in Esprit and Savanna Non-Alcoholic recorded strong performances in the period.

Other Markets performance

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In African markets, outside South Africa, revenue declined by 3.0% on lower sales volumes, which were down by 14.7%, mainly as a result of a 19.1% decline in volumes in BLNE countries (Botswana, Lesotho, Namibia and Eswatini).

Focus markets on the continent, outside the Southern African Customs Union (SACU), grew revenue by 6.6%, underscoring the aim to expand operations in this region.

Nigerian, Angolan, Kenyan and Mozambican expansion investments yielded comparable revenue growth of 21.2% on higher sales volumes of 1.7%.

The spirits category grew double-digits in revenues, led by double-digit revenue and volume growth from Kibao and Hunter’s Choice.  Commendable mainstream wine growth was led by 4th Street, Caprice and Drostdy-Hof brands across the continent.

The Africa region in general contributed 61.0% to foreign revenue, with its contribution to Group revenue rising to 17.7% in the period.

Volumes in international markets outside Africa anticipated the decline of 13.1% and revenue by 8.8% as the business re-aligned to its premium spirits focus.

Total whisky volumes and revenues increased by 22.3% and 8.4% respectively, led by Bunnahabhain and Deanston in challenging trading conditions.

Amarula and export wine brands were affected by export restrictions and the COVID19 effect on the global travel retail sector.

Social responsibility initiatives in the wake of COVID-19

Distell is playing a partnership role with government, alongside key industry players, to tackle alcohol abuse through an effective social compact to minimise the long-term effect of the issue on society as a whole.

“Further prohibition or blunt instruments do not work – real partnerships, enforcement of current laws and targeted interventions do,” stated Rushton.

In addition to that, Distell’s South African and International operations donated a total of 180, 000 litres of sanitiser, along with its Kenyan operations donating 105,000 litres of ethanol for the use of sanitisers to local Government, NGO’s, taverns and customers in order to support the need for good hygiene practices and responsible trading in vulnerable communities.

Looking ahead, the company anticipates a tough domestic environment with falling disposable income and increasing unemployment as its key concerns.

“We are, however, confident of the way we are managing the business to remain flexible and recession-proof.

“Our more focused and diversified portfolio of brands along price points, occasions and innovation in response to consumer trends will enable us to position ourselves well for any recovery,” said Rushton.

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