S AFRICA: Drinks classification ruling hampers Distell in FY
- FY net profits inch up by 1.2% to ZAR970.9m (US$116.7m)
- Sales in year to end of June rise by 15% to ZAR14.18bn
- Operating profits slip by 1.7% to ZAR1.41bn
- Legal ruling results in ZAR298m additional duty provision
Distell has the South African authorities to thank for slowing profits in its latest fiscal year
Distell has seen a category classification ruling in its domestic market hit profits in its latest fiscal year.
The South African company said late yesterday (22 August) that net profits in the year to the end of June came in only 1.2% up on the same period a year earlier, at ZAR970.9m (US$116.7m). While sales increased by 15% to ZAR14.18bn, operating profits dipped by 1.7% to ZAR1.41bn.
The company was forced to provide additional excise duty to the tune of ZAR297.8m following a ruling by the company's Supreme Court of Appeal in favour of the South African Revenue Service (SARS). Back in 2007, the SARS ruled that wine aperitifs, previously classed as fermented beverages, should be classed as spirituous beverages and subsequently taxed at a higher rate of duty.
Distell noted, however, that, with effect from 23 February last year, wine aperitifs are being taxed at a rate "considerably lower than those pertaining to spirituous beverages".
Stripping out the one-off charge, Distell said its net and operating profits both performed well, rising by 23.1% and 19%, respectively.
Sales volumes in the year were also up, by 9.9% year-on-year.
While domestic sales increased by 13.8% in value terms, international sales also rose, by 13.8%.
"Continued uncertainty about the global macro-economic environment makes it difficult to predict trends in consumer demand," said Distell.
"However, we do believe challenging trading conditions will persist in the year ahead, with unemployment and limited disposable income likely to continue to curtail consumer spending, both domestically and internationally."
To read the company's official statement, click here.
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