Distell’s revenues rise as African market improves

South African drinks company Distell has announced a healthy full year rise in profits thanks to the acquisition of a brewery, strong sub-Saharan sales and a weaker rand currency.

Distell has announced a 11.9% rise in revenue part in thanks to a weaker South African currency and strong sub-Saharan sales

The spirits, wine and beer producer, whose portfolio includes Amarula liqueur, posted a revenue rise of 11.9% to R15.9 billion, while headline earnings rose 12% to R1.1 billion and operating profit increased 26.6% to R1.8 billion.

Excluding the impact of an additional excise duty provision and interest provision of the previous year – as well as the impact of the purchase of Burn Stewart Distillers this April for £160 million – headline earnings increased by 14% and operating profit increased by 8.3%.

Distell also noted its “strategic purchase” of a range of scotch whisky brands, several distilleries and stocks in maturation, aimed to “strengthen its product portfolio, extend its global reach and advance South African leadership of the spirits industry”.

Jan Scannell, group MD, said: “Steep increases in excise duties and marketing expenses were partially offset by foreign currency conversion gains. However, we also saw the benefits of improved efficiencies in the business and the normalisation of certain raw material input costs.”

The report highlighted that the “on-going appetite” for whiskies, the growth of Bisquit Cognac, and the good performance of Amarula cream liqueur, helped to offset the decline of the brandy segment, which was most vulnerable to the excise duty hikes.

Scannell added that the company aims to “continue their long term commitment to revive the entire category” through “developing leading offers”, celebrity endorsements and sports sponsorships.

At the super-premium level, brandy, Cognac and whisky brands grew almost 50% in volume. Overall sales outside South Africa rose 10.2% with revenue rising 23.1%. Sub-Saharan African markets, excluding South Africa, contributed 55.6% to foreign revenue.

Noting that challenging trading conditions were expected to persist, Scannell said: “There have been some tentative signs of economic recovery in the US, but the countries in the Eurozone remain in recession.

“Emerging and developing countries, hit by the sluggish economies of their developed trading partners and lower commodity prices, are also growing at a slower rate than in the past. Domestically, high unemployment and limited disposable income continue to curtail consumer spending.”

He added that despite these conditions, the company is in a strong position to enhance its route into market.