Distell records full year revenue and profit rise despite challenging market conditions

Distell Group, South Africa’s leading cider, spirits and wine producer reported revenue growth of 10.4% for the full-year ending in June 2018. Revenue grew to R24.2bn rand ($1.9bn) on a 4.6% volume lift.

The company reported a strong growth of 10.1% in South Africa, its home market on 4.4% higher volumes amid low GDP growth and higher cost of living putting increased pressure on consumer disposable income.

Distell derives 74% of its revenue in South Africa.

The company said that its ready-to-drink (RTD) portfolio delivered strong revenue and volume growth, led by Savanna and Bernini cider brands amid increased competition. The spirits category continued to perform well, with brandy volumes still resilient and whisky recovering in the second half. The company notes that gin volume continued to grow at 29.3% alongside vodka which grew 43.6% following a major acquisition of premium Cruz vodka. The domestic wine portfolio rose 7.4%, with help from premium and mainstream wines.

In African markets outside of South Africa, revenue grew 19.5%, bolstered by 7% volume rise. The increased volumes were largely driven by the inclusion of KWA Holdings East Africa Limited (KHEAL) in Kenya which was acquired in April 2017.

Focus markets on the continent, such as Botswana, Kenya, Zambia and Zimbabwe all recorded strong growth. However, the company said that its overall performance was hampered by challenging trading conditions in Mozambique, Nigeria and a one-off negative impact from the group’s Tanzania Distilleries Limited (TDL). Also, a 50% currency devaluation in Angola, its largest African market and a slow extraction of cash from that country hurt its performance. According to the company, the African region accounted for 55% of all foreign revenue.

The company pointed out that Best Global Brands (BGB), a pan African brand with established trading platforms in Angola, Nigeria, Kenya and Zambia, which it acquired a 26% stake in July 2017 for $54.6m, with an agreement to acquire the remaining 74% shares by 2019 if certain benchmarks were met surpassed first year volume and revenue targets with 46 million litres of spirits sold, 33 million litres of which was sold in Angola, 12 million litres in Nigeria and 0.7 million litres in the rest of Africa.

In other international markets outside of Africa, revenue grew by 5.8% on 1.8% higher volumes, driven by Europe, Latin America and Asia pacific regions, as well as Travel Retail.

The company noted that foreign currency translation losses which amounted to R51.4 million rand improved from the prior year’s R63.3 million rand.

Distell said that it acquired the remaining 50% stake in joint venture, Lusan Holdings proprietary Limited.

Total Group net profit for the full year grew 28.6% to R1.7bn rand ($132 million) from R1.3bn rand in 2017.

Looking to the future, the group said it anticipates challenging macroeconomic condition to continue in the home front into 2019, but will leverage its unique abilities to compete across categories and price continuum, taste profiles and mixed gender occasions. It will grow revenue through cider/RTD growth, premiumization and improved market execution.

In the rest of Africa, it hopes to balance risk and opportunities by rolling out African platforms with local route-to-market in Angola, Nigeria and Kenya. It will also expand Best Global Brands presence.

Elsewhere, it will grow premium spirits and its wine portfolio, as well as optimize and build a self-sufficient supply chain.

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