Distell earmarks R500m for its foray into the rest of Africa

SOUTH AFRICA – Distell Group has earmarked more than R500m for investments into various African countries and it will partly fund the war chest through a cost saving and supply chain efficiency programme, the liquor group said on Monday.

Meanwhile, it announced that group revenue from Africa outside South Africa grew 20% in its year to June, helping overall revenue rise 12.8% to R17.7bn.

The weaker rand and the first full contribution from Scotch whisky business Burn Stewart Distillers, bought last year, also boosted revenue.

The group generated 32% of its sales internationally, up from 26% previously. Distell’s headline earnings per share jumped 35.7% to 721.3c, though this was skewed by a once-off fair value remeasurement of the contingent purchase price relating to the Burn Stewart takeover.

Normalised headline earnings grew 1.7% to R1.37bn.

MD Richard Rushton said Distell’s international growth would include bulking up Burn Stewart’s Taiwanese business and integrating its distribution operation in the US with Distell’s. But the rest of Africa “is our priority”.

After the end of the reporting period, Distell bought a 26% stake in Kenya Wine Agencies East Africa for R105m.

Distell would step up its investments in countries including Angola, Ghana and Nigeria, Mr Rushton said. It would invest in local production, route-to-market infrastructure and “in people”. It would also “make brand-related investments”.

Distell has commissioned a bottling line in Ghana and has bought land in Nigeria and Angola to set up plants.

“We have gone through some structural change in Distell as a result of the revised corporate strategy,” Mr Rushton said. “And as part of that, we have embarked on a much more ambitious savings and supply chain efficiency programme.

“We have earmarked an ambitious savings target this coming year to start to finance part of our investment ambitions in Africa and other select emerging markets around the world.”

Mr Rushton said the group would also focus on the “premiumisation” of various brands. It had already done this with Bain’s Cape Mountain Whisky, leading to the brand doubling its volumes in the year ended June.

“We understand premiumisation is a global trend that we need to get on top of,” Mr Rushton said. He described the group’s full-year performance as “resilient” given difficult trading conditions, particularly in South Africa.

Distell’s share price fell 1.76% to close at R134.59 on Monday.

IG market analyst Shaun Murison said on Monday that given the “lacklustre” normalised headline earnings growth and the resultant unchanged final dividend, “investors have displayed a relative disappointment judging by today’s share price activity”.

Distell left its final dividend at 183c per share.

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