SOUTH AFRICA: KWV's profits slump in H1

KWV’s net profits have slumped by 80% for the first half of its fiscal year, following write-down charges and a drop in sales.

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Profits for the six months to 31 December 2010 dropped by 79.8% to ZAR5.8m (US$0.8m), the South African wine and spirits group said today (22 February). Its core wine and spirits business swung to losses of ZAR7.2m, versus profits of ZAR20.7m in the same period of the previous year. 

KWV blamed the fall on its decision to increase prices on non-profitable products, such as Pearly Bay in the UK, coupled with a strong rand currency and the slow recovery of the global economy. Operating profits slid by 85%, to ZAR5.3m.

Many of its UK listings were dropped and KWV's global sales sank from about 2.5m cases to 500,000 cases. Global net sales fell by 9% to ZAR360m, although high-end wines and brandies showed growth in Japan and China.

KWV's CEO, Thys Loubser, said of the UK: “We can’t continue subsidising wines in that market.” Separately, Loubser said today that KWV is still open to takeover offers.

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