Distell to split its international operations as profits shrink 45.5%

SOUTH AFRICA – Distell Group, South Africa-based alcoholic drinks company, has unveil plans of splitting its international operations into three business units in a move that seeks to grow its business in key markets.

According to an IOL Business report, the Nederburg wines and Klipdrift brandies owner said the operations would be split into international spirits, exports, and premium wine through Libertas Vineyards and Estates.

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“We believe this gives us the best opportunity to grow premium spirits and wines in key markets and drive brand premiumisation in line with consumer demand,” Distell said.

Distell, which reported 45.5% decline in net profits to R909.8m (US$59.45 million) during the year to end June 2019, said its operations outside the home market recorded lower improved sales volumes.

Despite currency devaluations and liquidity restrictions in Zimbabwe and Angola, the rest-of-Africa business grew at a faster pace, with comparable revenue growth of 20% as sales volumes lifted 10.3%.

Economic hardships in Angola and Zimbabwe forced the company to impair about two-thirds of the value of its 26 percent investment in Best Global Brands Limited in Angola and a credit loss provision of about 80% on its US dollar denominated savings bond with the Zimbabwe Reserve Bank.

“We remain confident in the Angola business, given that volumes and market share continue to improve since our original 26 percent acquisition as structural reforms take effect.

“We will also continue to support the African Distillers Limited team in Zimbabwe, in which we own a 31 percent indirect interest, throughout this period,” the group said.

However, focus markets on the continent, outside the Southern African Customs Union, delivered excellent results, with revenue up 40.6%.

All categories delivered overall double-digit volume and revenue growth, led by Nigeria, Kenya, Zambia, Ghana and Mozambique, Distell said. 

The ready-to-drink category growth came from Hunters Dry and Savanna, while the spirits category growth was led by Kibao and Hunter’s Choice Whisky in Kenya.

The group said it would also keep a close eye on Nigeria, Ghana, Kenya and Mozambique in the next five years because these markets delivered exceptional growth during the period compared to the sluggish performance in the Southern African Customs Union.

“Sub-Saharan Africa’s growth outlook affirms our strategic focus on this region,” the group said, adding that it wanted to accelerate its growth in certain markets.

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