SOUTH AFRICA – Distell Group, producer and marketer of wines, ciders, spirit and ready-to-drinks beverages has reported 3.8% rise in half year revenue for the period ended December 2020 alongside volume expansion of 0.8% compared to the previous year.
This is attributed to the remarkable performance by its businesses outside of South Africa which helped ease some of the pain from the outright ban and other restrictions on alcohol in its main market.
The maker of Amarula, Savanna and Hunter’s Dry earns over 70% of its revenues at home, has been hit-hard by three total prohibitions and limitations on alcohol trade aimed at easing the burden on hospitals during the coronavirus pandemic.
However, the company notes that although 41 trading days were lost in its home country due to the alcohol ban, the business was able to recover and achieve near flat revenues and a 1.4% volume decline.
“Trading conditions across the group’s operating areas continue to be impacted in various ways as governments deal with the challenges of the Covid-19 pandemic. South Africa, our largest market by revenue, has seen the government imposing further restrictions on the trading of alcoholic beverages, reducing the trading period by 22 percent,” the group said.
In the rest of Africa, excluding Botswana, Lesotho, Namibia and Eswatini (BLNE), the group recorded an impressive performance with increased revenues and volumes of about 20% compared to the prior period.
This was largely driven by Kenya attaining a 17% growth in revenue and 9.8% volume growth), Mozambique’s revenue was up 33.3% with a volume growth of 15% and Nigeria’s earning inched-up by 22.9% Revenue while volume was up by 20.3%.
Meanwhile, the Africa business, including BLNE countries, also performed well with a revenue increase of 12.7% supported by 11.7% growth in volumes, driven by a recovery in trading following the easing of border closures and no further bans on alcohol sales.
The double-digit revenue improvements in markets outside of South Africa is attributed to the group’s agility and previous investments in route-to-market (RTM) and optimisation of its production network.
The strong growth momentum was witnessed at Distell’s international business registering 15.4% revenue growth and significant margin improvement.
This is mostly due to the fact that the business capitalised on its premium whisky brands, improved online sales channels and historical investments in aged stock.
“Apart from a resilient South African business, Distell’s businesses in both African and international markets are performing well by capitalising on previous investments and focused execution.”
Distell Group
Whilst overall performance and cash generation are ahead of expectations, the group remains cautious as it trades into the second half of the current reporting period where a full month’s trading has already been lost, and potential implementation of future alcohol bans in South Africa remain unpredictable.
The current surplus of wine in South Africa created by previous bans is also a major concern to the Group which may bring long-term structural challenges to the wine industry.
“Apart from a resilient South African business, Distell’s businesses in both African and international markets are performing well by capitalising on previous investments and focused execution.
“As part of the Group’s diversification strategy, we will continue our measured investment behind key markets and brands to pursue strategic growth opportunities,” stated Distell.
The Group is confident in its ability to generate cash, the appeal of its diverse portfolio of brands, superior customer execution, production efficiencies resulting from past investments and sufficient liquidity headroom to navigate any short-term challenges in the current environment.
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