S AFRICA: Distell H1 profits drop, cautious on outlook
Cider sales hold up in tough H1
Distell, the South Africa-based drinks group, has reported a drop in half-year profits as consumers trade down to cheaper drinks.
Net profits for the six months to the end of December fell by 2% on the same period of the previous year, to ZAR623m (US$81.5m), Distell said yesterday (17 February).
The fall came as the company, owner of Savanna cider, battled against unfavourable foreign currency rates, weaker consumer spending power and higher costs.
Despite this, net sales for the six months rose by 9% to ZAR6.6bn, helped on by a near-8% rise in volume sales led by cider and ready-to-drink brands, said the group. Operating profits rose by 2% to ZAR949m.
"The severity of the recession notwithstanding, Distell has maintained its policy of protecting brand equity by not purchasing market share at the expense of profitability," said group managing director Jan Scanell.
International sales volumes rose by 14%, although value sales increased more slowly, at 12%, due to unfavourable currency translations into the South African rand, said Distell. Top export brands include Amarula cream liqueur, Two Oceans wine and Savanna.
Scannell said that Distell has maintained solid finances, with net debt to equity ratio of 3.7 at the end of the half-year period.
But, he predicted little economic improvement in key markets in the second half.
"Persistent uncertainty and continued volatility make it difficult to predict either the timing or the extent of any upturn, particularly given the present high levels of consumer debt and unemployment. In South Africa, the situation is exacerbated by still deepening job losses, as well as rising energy costs," he said.
Distell expects some uplift from its deal with FIFA to market Amarula and wine brand Nederburg around the World Cup, set to begin in South Africa in June.
For the full half-year figures, as a PDF file, click here.
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