Distell’s revenues rise despite SA difficulties

South African drinks group Distell has reported a rise in revenue for the first half of 2013 despite an “extremely challenging” domestic market.

Distell’s international spirit volumes increased 54% after increased demand for Amarula and its new whisky portfolio

For the first six months of the year to December 2013, Distell’s revenues increased 15% year-on-year to R9.9 billion (£552.9m).

The group’s operating profit increased 13.4%, excluding its acquisition of Burn Stewart Distillers, producer of Bunnahabhain Scotch, for £160m in April 2013.

Distell, owner of Amarula liqueur, said that South Africa proved a challenging environment for its brands due to a rise in inflation, increased fuel prices and high levels of personal debt.

However, the group’s revenue increased 5.2% in the region, while its sales volumes were up 3.1%.

International revenue meanwhile was bolstered 48.9% due to a weak rand and international sales volumes increased 12.7%. The group noted that Sub-Saharan African markets “delivered strong growth” across all categories, contributing 55.1% to foreign revenue.

Distell’s spirits division suffered across the globe due to a decline in brandy sales, which could not be salvaged by the “impressive growth” of its whisky portfolio, including Bain’s Mountain and Three Ships.

A statement by Distell claimed that it had been investing in a range of marketing initiatives and packaging upgrades which had “impacted positively on its more premium and specialty brandies”.

The group stated this was part of a long-term project help boost the “aspirational appeal of brandies” which would in turn “take several years” to translate into improved sales for the category as a whole.

International spirits volumes rose 54% thanks to its enlarged whisky portfolio following the acquisition of Burn Stewart Distillers, and an increased demand for Amarula liqueur.

Richard Rushton, managing director of Distell, said of performance in Africa: “We continue to partner in joint ventures with local players in appropriate markets as far as possible to capitalise untapped market demand across the continent.

“These ventures are being structured not only to build and expand well-established brands but also to explore the viability of producing local product ranges to suit market preferences at relevant price points.”

Net financing costs increased from R23.9m to R110.2m due to increased borrowings during the period, while total assets increased 15.4% to R12.7bn, excluding new business acquisitions.

Rushton added that he expected trading conditions to “remain extremely tough”.

“However, with the company’s diversified portfolio of strong brands, the recent acquisition of BSD, coupled with our investment in Africa, we are confident of delivering long-term growth to all our stakeholders,” he said.