By Tunde Osho
South African wine, spirits and cider maker Distell Group, has reported a 9.1% revenue growth for the first six months of its financial year ending on 31 December 2017. Sales rose to R13.4bn rand ($1.15bn) from R12.3bn in 2016, driven by a 3.6% volume increase (403 million litres).
The group revealed that it was ramping up production of its 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 August 2017, with Angola’s full-year volume expected to reach 33 million litres and Nigeria, 10 million litres.
In the rest of the world, the group reported 6% volume increase, with revenue growth of 7.7%, driven by increased local investment in the UK, which was impacted by a stronger rand and a less favourable sales mix. Overall, Europe saw a 16.3% sales increase on a 6.45 volume lift, while Latin America saw a strong growth of 11.7% volume increase, with revenue rising 20.5% in the period. Travel Retail grew 43.2%. North America experienced volume and sales decline of 18% and 27% respectively, while Asia Pacific saw a 5% dip in revenue.
The increase in the group’s revenue was helped by a 2.9% volume lift in South Africa, the firm’s largest market which contributed 75.3% of the group’s total revenue. Sales in its home market grew 8.2%, boosted by strong performance in its brandy portfolio which grew 14%, while Gin provided a 21% sales lift. RTDs volume rose 3.8% in the period. The firm notes that it was able to grow revenue appreciably in its home market amid a suppressed consumer market and sustained competitor activity.
In the rest of Africa which contributed 13.7% of the group’s total half-year revenue, performance was strong in focus markets such as in BLNS countries (Botswana, Lesotho, Namibia, and Swaziland), Kenya, Zambia and Zimbabwe, with mixed performance in Mozambique and Nigeria. Total volume growth in Africa outside of South Africa was 6.6% with revenue growth of 18.5%, driven by 42% revenue growth in BLNS, double-digit revenue gain in Zambia on a 31.4% volume lift; 17.3% sales growth in Zimbabwe boosted by locally produced ciders, and a 560% revenue surge in its Kenya subsidiary. Distell acquired KWA Holdings East Africa Limited (KHEAL) in Kenya in April 2017 which is responsible for the strong lift in sales.
Mozambique suffered volume and revenue declines of 19.2% and 35.3% respectively and so did Nigeria, which saw its revenue drop by 35.4%, while volumes plummeted 31.7% due to challenging macroeconomic environment. The company said it took a one-off R85.9m rand impairment charge on its 35% investment in Tanzania Distilleries Limited (TDL).
On its brands, the group said that Amarula, its cream liqueur brand grew in the top five markets, while the firm gained market share for South Africa wines in 17 international markets. Its whiskey brands grew 0.5% market share in the Taiwanese market against a declining market, the company said.
Net profit for the half-year rose 8.6% to R1.2bn rand from the previous year.
Going forward, the group said it continues to focus on further efficiency and cost improvements across its business as it refines its business model and brand portfolio.