Distell’s full-year sales rise despite economic volatility

South African drinks group Distell saw its reported sales rise by 3.7% in 2016/17 against tough economic trading conditions in its domestic market and currency fluctuations.

Distell saw reported sales rise by 3.7% in 2016/17 in spite of tough economic trading conditions

The group, which owns Amarula cream liqueur, Bunnahabhain single malt Scotch whisky, and Richelieu brandy, saw group sales reach R22,3 billion (US$1.72bn) for the year ending 30 June 2017.

Despite implementing efficiency improvements and cost containment initiatives across the business, the group’s financial results were impacted by a stronger rand – with foreign currency translation losses amounting to R65,6 million (US$430k).

Sales in South Africa increased by 7.8% in spite of the country’s economic recession and “increased multinational competition”.

Volumes grew by 1.5% thanks to an improved performance in the second half of the year. The group’s spirits portfolio delivered “strong revenue and volume growth”, particularly within its brandy stable – Viceroy grew by 70%, becoming the category leader in the market, while Klipdrift and Richelieu maintained volumes.

Outside of South Africa, African markets delivered “mixed results” due to “economic uncertainty and lower income from commodities”, with sales volumes down by 5.2% year-on-year.

The group’s ‘focus’ markets, which include Namibia, Kenya, Nigeria and Zimbabwe, recorded “strong growth” but were negatively impacted by tough macroeconomic conditions in Angola.

Outside of Africa, Distell’s performance was “resilient” amid “challenging trading conditions and consolidation of multinational competitors”.

Total international volumes grew by 3.6%, driven by the group’s consolidation of key route-to-market changes. Its spirits portfolio delivered strong volume growth in the region, with “good” growth in Taiwan and Latin America led by whisky brand Scottish Leader and Amarula respectively.

However, international sales dropped by 12.1% due to the effects of a stronger rand compounded by the impact of Brexit on UK operations. When excluding the effects of foreign exchange movements, total profitability rose by double digits.

Looking ahead, the group anticipates “muted” global economic growth as African GDP continues to be impacted by low commodity prices.

Domestically, Distell expects the recession to “continue to put additional pressure on consumers”, while exchange rates will continue to be “volatile”. A “modest” recovery in economic growth is expected in the second half of fiscal 2018.

“The group continues to invest in priority markets as it seeks to expand its RTM presence, specifically in Africa,” the results stated. “In addition, significant restructuring of the Group’s brand portfolio and asset base is underway to simplify and focus our business. This process will take two to three years to be fully implemented and are accompanied by changes to our organisational structures and operating models.”