Combined net attributable profits of the newly merged South African liquor giant, Distell, declined by 47.8% to a fraction under R121m for the six months to December 2000, with further declines expected during the current period to June.

This is the first interim report for Distell, formed by the merger of Distillers Corporation and Stellenbosch Farmers' Winery. They will officially launch the new company in March.

Managing director Jan Scannel said R65.5m had been spent on the merger to December and a further R112m was expected to be spent for the rest of this financial year and the next as part of this process.

Consolidated revenue dropped 3.6% to R2.54 billion and profits before exceptional items fell by 28.6% to R194,6m from R272.5m for the same period in 1999.

The unfavourable economic conditions and changes in consumer spending impacted negatively on the domestic market for wine, spirits and alcoholic fruit beverages. Although the group held its position in the domestic market, turnover decreased by 8%. But export sales were up 15% during the period. These make up 16% of the group's total turnover.

The anticipated benefits of the merger would not materialise in the current financial year, but were expected to do so in the next. As a result of this, and the continuing decline in consumer spending, a further decline in earnings for the second half of the financial year was expected, compared with the combined profits of Distillers and SFW, during the same period last year.

When Distell issued a profit warning on 14 December last year, share prices dropped by 16% from 810c to 680c in the run-up to the new year. Those figures recovered significantly since then - and earlier in the week were quoted at 840c - but dropped marginally by 20c at the close of business yesterday.