SOUTH AFRICA – Despite repeated bans on alcohol sales at his home market, Distell is expecting strong profit growth for the year to end-June.
The owner of brands like Savanna, Hunter’s and Klipdrift, expects its headline earnings will jump by more than 230% to stand at between 735.6 cents and 782.7 cents, compared to the previous year’s 235.3 cents.
This will also be almost 20% higher than in its HEPS of 2019 financial year, before the impact of the pandemic, which was 652.9 cents.
According to the drink maker, the strength of the route-to-market (RTM) in South Africa, alongside improved customer execution, innovations and brand strength translated into further market share gains across all categories in the period.
This has resulted in the South African business achieving revenue and volume growth of 29.4% and 28.7% respectively when compared to the prior period.
This represents a 5.8% improvement in revenue and a 3.5% volume decline when compared to pre-COVID levels in FY19 despite a 20% reduction in trading days in the current reporting period.
Meanwhile, its operations in the BLNE (Botswana, Lesotho, Namibia & Eswatini) regions performed admirably notwithstanding being adversely affected by specific country bans on alcohol sales.
Revenue and volumes in this market improved by 23.6% and 22.2% respectively when compare to the prior period.
This represents a 6.7% revenue improvement with near flat volumes when compared to FY19.
The group’s Africa business outside of BLNE has continued to perform resiliently during the current reporting period, led by Mozambique, Nigeria, Ghana and Zambia as a result of continued RTM investments.
Comparative revenue and volumes are expected to be up by 22.4% and 38.6% respectively when compared to the prior period.
Compared to FY19, revenue is expected to increase by 30.5% and volumes by 24.5%.
Its international operations were negatively affected early in the onset of the global pandemic given the adverse effect on global travel retail sales, combined with Amarula and wine export challenges to markets outside of South Africa.
The business has subsequently recovered well in its focus on key markets, premium spirits and increased digital channel execution.
As a result, a 10.0% revenue increase is expected compared to the prior period, with a flat revenue but meaningful margin improvement compared to FY19 levels.
Overall, as a result of the above, the group is expecting a rise of 26.3% in revenue and 26.2% volume growth compared to the prior period.
This represents a 7.7% revenue increase and a 2.1% volume decline when compared to FY19.
“The Group’s agility to respond in the face of major business disruption enabled by strategic investments in RTM, brand development, innovation, true supplier partnerships and supply chain optimization supports our confidence in our ability to fully recover and compete effectively in the long-term,” indicated Distell.
Distell calls for alternative to South Africa alcohol ban
Despite the expected stellar performance, the company has revealed that the fourth ban on alcohol in its home market South Africa had cost it about R30m (US$2m) in operating profit so far.
It added that recent unrest in South Africa – some of the worst in years – had cost it an estimated R100m (US$6.7m) after one of its distribution centres was damaged.
“We estimate that 332 of our direct and indirect customers have been adversely affected by looting during the recent unrest. This has added to the quantity in illicit hands, over and above robbing future sales from licensed Small-to-Medium-Enterprise (SME) business owners.
“The fourth ban on alcohol sales was announced with no warning, no consultation with the industry, and poor empirical justification.
“As an industry collective we are consistently and constructively in dialogue with decision makers to consider alternative solutions to prohibition,” lamented Distell.
This is will ensure the continued health of an industry that positively affects more than 1,000,000 livelihoods in South Africa.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. SUBSCRIBE HERE